During a spring and summer when much of the Massachusetts home market has been screaming like a steam whistle, the luxury market has instead been quietly chugging along.
Overall, single-family home sales were up 27 percent in July and 24.8 percent so far this year, accord ing to data provided by The Warren Group, publisher of Banker and Tradesman. But focusing in on the luxury market shows a slightly different story, with sales of single family homes over $1 million up 23.4 percent in July and only 13.7 percent year to date, compared with 2011.
And while overall July home sales may be approaching numbers not seen since the peak of the Massachusetts market in 2005, high-end home sales are still a little off the pace, with single family sales year-to-date still 2.4 percent below what they were at this point in 2007.
As with the overall sales picture, much of the reason comes down to one word: Inventory.
Taking Inventory
In the Boston market, luxury condo sales have been strong, and volumes are currently trending above 2008, itself a record for that segment. But “the inventory is very tight, and the pipeline is basically zero,” said Kevin Ahearn, president of Boston-based Otis & Ahearn Real Estate.
The big, Boston developments completed after the crash (and which had languished for the past several years) are now filling up, Ahearn said, most notably The Residences at W Boston, 45 Province and The Clarendon.
“The W, which we represent, is about 70 percent sold now. Clarendon has only a handful of units, and 45 Province has probably about 50 or 60 [units available],” Ahearn told Banker & Tradesman. “The inventory of what’s available is dwindling quickly.”
And with the construction pipeline only recently beginning to thaw with new construction in Downtown Crossing and the Seaport – projects that still won’t be ready for occupancy for at least a few years – upward pressure is already being exerted on prices, Ahearn said.
What’s less clear is whether it will cause buyers to balk.
Buyers “are very surprised,” at how high condo prices have stayed, Ahearn said. “In that regard I still think there’s a little bit of paralysis,” regarding the decision to purchase.
That’s the case around the commonwealth for bigger ticket homes.
“From the buyer’s side, there’s not as much selection,” said Paul Grover, co-broker/owner of Robert Paul Properties in Osterville.
That could help account for the relatively few record-breaking sales this year – no single-family home has broken the $10 million threshold through the first seven months of the year, something which at least a handful of sales have managed every year since 2007. Even last year, a pretty dismal year for sales all around, there were seven $10 million-plus sales through July.
One Step At A Time
But on the Cape, where prices took a bigger hit in the crash, demand has stayed strong – even to the extent of stretching out the home-buying season in the vacation home-dominated Cape and Islands market.
“We usually have a very active spring with people looking to be in the house for the summer, and typically in our summer months we’re not as busy,” said Grover. But not this year. “It’s been strong for us throughout the summer; consumer confidence has changed. It still feels good,” headed into the fall market, he said.
Even the political climate hasn’t been enough to turn people off, Grover noted. “I’ve been in the game a long time, and every four years I hear [buyers] say it, ‘we’re going to wait until after the election.’ And I’m not really hearing people say that this year.”
In May, Grover said he felt it was likely that 2012 would top 2005 at the high end. He sees that as a bit more of a long shot now.
“We don’t want to get overconfident, but I’m cautiously optimistic,” Grover concluded. “I just think that from what we’ve been through from the beginning of the downturn, we’re just going to take it a step at a time.”
