On April 2, I dreamed I was allowed to take the helm of the Hub’s spring condo market – that I alone was charged with the responsibility of making the spring market hum with the precision of a high-performance automobile. It was an awesome responsibility, yet having been through so many spring markets myself, I felt up to the task.
Enthusiastically, I started my check list, trying to get a baseline of where we were and what would be needed to make this the best spring market ever.
Low interest rates? Check.
Downsizers who can easily sell their suburban homes for urban digs? Check.
Appreciating stock market? Check.
International money? Check.
I was feeling pretty confident. The buy side was looking absolutely fantastic. That’s when the first note of trouble sounded.
“Inventory?” I called out. There was no answer. “Inventory?” I shouted, hoping for a response. After a noticeable silence, I yelled out, “Hey, who forgot to pick up the inventory?” A bead of sweat materialized on my forehead. “We got thousands of people coming to buy Hub condos and we might not have anything to sell them.”
“We could jack up the prices,” suggested my first officer. “That might slow the sales pace until we get some inventory?”
“No need to do that,” I said. “When we got nothing to sell, it happens naturally.” And although I was dreaming, all the numbers in my dream were real; they were the numbers from the research I had been doing in MLS about the Hub condo market’s actual market conditions. In March, I had noted that the lack of inventory had created some almost unfathomable increases in the median ask prices. In several key condo markets, this year’s median ask was hundreds of thousands higher than last year’s. Incredible!
An Issue With Inventory
“What is the current inventory situation?” I asked, looking for specifics, wondering how prices would be affected.
“In the city, Chief, we were down to 475 condos being actively marketed on April 1.”
“How many did we sell last April?” I asked.
“629,” was the reply.
“629!?”… Suddenly, I had a sinking sensation. Ok, that’s the whole city of Boston, I told myself, thinking that it might be even worse in the better neighborhoods. “How are our better markets doing?” I asked my crew.
“Well, in the Nine Markets segment, we were down to 353 units this April 1 and last April we sold 664.”
My jaw dropped. That was bad news. The Nine Market segment is like the Dow-Jones Industrial Average for Hub condos. It’s shorthand for the cumulative totals of the area’s best and most valuable condo markets. I knew higher prices could not slow down buying in these markets. In this winter that wouldn’t quit, a Trowbridge Street condo in Cambridge went under agreement for more than $300,000 over asking. And in March in Brookline, a condo on Alton Place closed for $266,000 more than the listing. Ready, willing and most importantly, extremely able buyers will pay what it takes to be in these areas, and in Beacon Hill, Back Bay, Charlestown, Somerville, Jamaica Plain, South End and South Boston. Anxiously, I noted that the Hub’s immediate condo demand outstripped its current supply by 50 to 88 percent.
I’ve been charting the lack of inventory for at least two years, but the way it appears now seems more dangerous than amazing. For every Boston condo under $500K on the market on March 5, there were more than five on the market just three years ago. In the Nine Markets, more than nine sub-$500K condos had been on three years ago for every one on today. But of course, the region is experiencing extremely low inventory across the board, and not just at low price points. Low inventory tanks transaction counts. A spring of multiple offers means countless occasions with the potential to make multiple sales, but only one sale was made.
Notable Lack Of Luxury Development
“What’s going on in luxury markets?” I asked, looking for some small measure of relief.
“Richie Rich is on the move, Chief,” said my first officer. “In Q1, despite a noticeable lack of luxury development, the city put more luxury condos under agreement than ever. Under agreements for condos listed at a million-plus are up 20 percent from a year ago and 50 percent more than 2007, luxury’s best pre-crash market,” said the first mate.
“The ultra-luxury segment is doing even better,” said the second mate. “In Q1, there was nearly a 50 percent increase in under agreements for Boston condos listed in excess of $2 million versus a year ago, twice what it was in Q1 2012, and four times as many as Q1 2006.”
I did a double take. Of course it was great news – more happy buyers and more happy sellers than ever before in this segment – but I couldn’t help thinking, people have housing money to burn, and the majority of my developers are on the sidelines, either scrambling a few steps behind the market uptick or preferring luxury rentals to luxury sales. Sure, the Millennium Tower will be opening a sales office in less than a month, but oh, how I wish I had 40 floors of brand-new condos, with panoramic views, and ridiculous by-the-square-foot prices to sell right now.
The lack of inventory was turning my spring market dream into a nightmare of Freddy Krueger proportions. Then I woke up in a cold sweat, to the best seller’s market the Hub has ever seen.
David Bates is a broker with Gibson/Sotheby’s International Realty and author of The Bates Real Estate Blog, www.BatesRealEstateReport.com, and a recently published e-book, “Context: Nine Key Condo Markets, 2.0.”
