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Median condominium and co-op prices in Manhattan plunged 8.2 percent in August while sales fell even faster, dropping 14.2 percent. But Boston has trends to support continued price growth.
Home flippers, investors and just plain everyday buyers across Boston and its many suburbs must have missed the memo.
While rest of the country is finally waving goodbye to the Great Real Estate Boom of the 2010s, we’re still acting like it’s 2015, forking over gobs of money for ever–pricier single-family homes and condominiums.
Even as prices and sales flatline in once–red-hot markets like New York, Los Angeles and San Francisco, the Boston area will see another round of increases, according to a new forecast by financial firm UBS.
Still, before you pop the champagne, you may want to consider the context here, for the data comes from a UBS price survey with a rather ominous title: the “Global Real Estate Bubble Index.”
It’s not the kind of test you want to rack up a big score on.
With that in mind, I got on the phone last week Jon Woloshin, real estate and lodging analyst at UBS.
While UBS has labeled its survey the “bubble index,” Woloshin apparently doesn’t think much of the title, arguing the study really is about whether homes and condos are overvalued or not in various markets.
From Woloshin’s perspective, real estate values are surging again in Greater Boston but not because there is a looming price or asset bubble.
Rather, it’s because Massachusetts has been able to shed its old “Taxachusetts” label from decades ago and become an attractive alternative to businesses fed up with rising taxes in Connecticut, New York, and New Jersey.
“On a relative basis, Boston has become much more business–friendly,” the UBS analyst said. “Boston is well–positioned in terms of growth.”
Plenty of Techies Willing to Pay
Woloshin has a point, with GE just one of a number of big firms across an array of industries that have either relocated here or rolled out big expansion plans.
There are certainly more techies and biotech researchers here than ever before, putting down big money for Cambridge condos and Needham McMansions alike and helping drive up prices across the board.
The UBS analyst sees home prices in the Boston posting further gains, and at the very least, beating the national average, which now stands at 3 percent.
The latest report from The Warren Group, publisher of this newspaper, bears this out.
Scott Van Voorhis
The median price for a home in Massachusetts jumped 4.7 percent to $420,000 in August, an all-time high.
Condo prices positively spiked – shooting up nearly 10 percent – $401,000, also an all-time high for August.
“I think Boston outperforms Los Angeles and New York and San Francisco,” Woloshin said.
Other Markets Outgrew Demand
By contrast, things are looking scarier by the month in other coastal markets.
Median condo and co-op prices in Manhattan plunged 8.2 percent in August, to $1,025,000, while sales fell even faster, dropping 14.2 percent, according to Douglas Elliman.
Units sat on the market for 152 days on average, the longest since 2012, in the aftermath of the Great Recession.
“Affordability issues, trade tensions and diminishing foreign demand have capped price growth in San Francisco and Los Angeles for now,” UBS notes in its bubble report. “Weakening support from the financial industry and an unfavorable tax treatment have led valuations to decline in New York.”
Yet, I wouldn’t be too sanguine here.
Prices in New York, San Francisco and Los Angeles only started to flatten out when they had reached such loony levels that it started to kill demand.
With construction of new homes and condos still not enough to keep up with demand, there is nothing to stop this pattern from repeating itself in Greater Boston, which is already pretty expensive.
UBS has our market pegged at “fairly valued,” which would probably be news to any number of frustrated condo or home buyers in Boston and in the suburbs.
Dotted with new towers like the 60-story One Dalton, Boston may look like a luxury wonderland, but all that glitters isn’t necessarily golden.
After all, it’s an open question how many condos in these new buildings are sitting empty after being snapped up by investors and flippers looking for a quick buck.
Even so, it seems unlikely we will see a bubble-like price implosion, but rather a slow but chronic leak.
Eventually, it will be Greater Boston’s turn to pay the piper. But until then, prices are only going to get crazier before they go lower again.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
