FRED MEYER
Market ‘normal’
Following a year of record-shattering condominium sales activity across the Bay State, unit sales during the first three quarters of 2006 plunged 13 percent and prices remained flat.
A total of 23,341 condos were sold in Massachusetts during the first nine months of the year, decreasing from 26,866 unit sales during the same months one year earlier, according to The Warren Group, parent company of Banker & Tradesman. The median sales price for condos, $278,900, remained virtually unchanged from a year earlier when the median price was $279,000.
Local Realtors say a plethora of newly built condominiums have contributed to a larger number of units on the market, giving buyers more choices and leading to an increase in the time it takes to sell condos. There were 20,729 condos listed for sale in Massachusetts in September, up from 17,697 during the same month in 2005, according to the Massachusetts Association of Realtors.
“There are a lot of buyers in the marketplace right now and there’s a lot of inventory,” said Jeffrey Heighton, who manages two Coldwell Banker Residential Brokerage offices in Boston’s Back Bay. “For the buyers, it’s a great time for them to be buying, but there’s a lot to look at and there’s a lot of competition with regard to listings.”
Condo sales dropped 10.7 percent in all Boston neighborhoods, and the median selling price fell 1.4 percent to $350,000. In downtown Boston – which includes sought-after neighborhoods like the Back Bay, Beacon Hill, South End and waterfront – sales declined 3.6 percent while the median price fell 6.4 percent to $472,500.
While Heighton said he has seen “quite a bit of price adjustments” in the Back Bay, particularly in cases where sellers were too aggressive with their original asking prices, he also pointed out that condos sold in the last month in the Boston’s Back Bay, Beacon Hill, South End and waterfront areas were going for 92 percent of the original list price.
With many newly built condominiums coming on the market this year, buyers had a wider selection of units from which to choose in those Boston neighborhoods. In fact, there were 707 condos available for sale last week in those four areas, compared to 431 at the beginning of September 2005, said Heighton, citing information from the MLS Property Information Network.
“The inventory is up, there’s no question about it,” said Heighton. However, he also pointed out that the supply of condos in some price ranges in the Back Bay is actually about the same or even lower today than it was a year ago.
Dave Stemberg, who manages four Boston offices for Hammond Residential GMAC, said during the last 18 months buyers had more leverage, and prices flattened, but the inventory of active property listings in the Back Bay, Beacon Hill, South End and Charlestown is actually starting to moderate.
“The emerging trend is that the supply is definitely beginning to diminish,” said Stemberg.
Jason Weissman, a principal of Boston Realty Advisors, also expressed optimism about the condo market. “The Boston market is really a market that is remaining strong. Yes volume is off. Yes there are more units on the market, and yes days on market has increased,” said Weissman. “There are buildings in Boston that seem to be retaining their values and are still hot commodities.”
Buyers who expect prices to fall and are waiting to make a move are contributing to the lower sales volume, according Weissman.
George Jamieson, vice president of sales and marketing for Conway Development Sales, a division of Norwell-based Jack Conway & Co., believes the biggest factor affecting the residential real estate market is the “oversupply” of both condos and single-family homes that are available for sale.
Conway Development Sales is currently marketing about a dozen condominium complexes in various phases of construction on the South Shore. Jamieson said the absorption rate at these projects has been very low, and in July and August, there was “no absorption” at all. Many buyers are watching and waiting.
“[Buyer] traffic has been fairly good. However, we’re not getting sales,” he said.
Jamieson said part of the reason for the slow sales activity is that “the entire psychology” of the buyer pool has shifted. Historically, condos have appealed to first-time, entry-level buyers as well as baby boomers and empty nesters seeking a new lifestyle.
With condo prices increasing so rapidly over the last few years, however, many first-time buyers have been priced out, said Jamieson, and empty nesters who are trying to sell single-family homes to move into new condos are running into problems because they’re competing in a market flooded with unsold homes.
“Those folks can’t sell their houses and they’re very nervous about moving forward and purchasing a condo until they can sell their house,” he said.
In addition, Jamieson said the Bay State housing market has been “saturated” with age-restricted condo developments designed for people 55 and older. “The problem now is that we have all these 55-and-over developments and people have to sell their homes and they’re not selling,” he said.
Buyers Looking
Cambridge experienced a steep decline in condo sales during the first three quarters of the year. Some 854 condos were sold in Cambridge from January through September, a 15.5 percent drop compared with the same nine months in 2005.
Condo values also dipped slightly in the city. The median selling price eased 1.2 percent to $410,000 during that period. Reflective of the moderation in prices is a townhouse condo in Cambridge on the Somerville border that is currently listed for sale with an asking price of $614,900. An almost identical unit in the same complex sold for $707,000 three years ago.
Fred Meyer, broker/owner of University Real Estate in Harvard Square, said he started sensing the slowdown in the summer of 2005 and believes sales and prices may have hit bottom and are on their way up. Meyer bases his theory on the fact that there were actually fewer condos and homes listed for sale and fewer price reductions in both Cambridge and Somerville in mid-October compared to the same period in 2005.
Meyer, however, did note that with 391 homes and condos available for sale in Cambridge as of last week and only 14 actually under agreement, sellers have to be careful with pricing.
“If you want your condo or house to be one of the rare 3.5 percent that sells, you have to price it well below your competition to make yours stand out. It’s just as simple as that,” he said.
Meyer added, “In 43 years, I’ve seen many of these cycles. This is really a normal, not a slow market.”
Ron Scott, who manages the Milton office of Jack Conway & Co., has seen some condos in Milton linger on the market for months.
Currently there are 20 condos listed for sale in Milton, which according to Scott is about double the number of condos that typically are offered for sale at this time of year. Fourteen of the condos have been on sale for more than three months, he said, and the majority of condo sellers have reduced their asking prices to attract offers.
Among the offerings is a condo with over 3,000 square feet of living space and four fireplaces that is located in an estate setting and was listed for sale about eight months ago for $799,900 and is now listed for $749,900. Another condo built about two or three years ago and located within a luxury complex along the waterfront has been on sale for more than a year. The original asking price of $750,000 for the unit has been reduced to $699,000.
“It’s the old supply-and-demand theory. Two years ago, something would be on [the market] and it would be gone in a day,” he said. “Now buyers are coming in and they’re looking.”
