When much of the real estate region feels like it is in the midst a heat wave, how do you tell which condominium markets are truly the hottest? I picked 10 key geographical markets that I thought should compete. Then, I used MLS to complete many calculations, comparing this year’s first half numbers to the first half of 2011 to see how much each market had changed. Then I compared the markets and their changes to each other, to see which had become hottest.
I noted that on July 1, six of the 10 markets had less than one-third of the condos they had on market the same date two years ago. As well, by my estimation, seven of the 10 markets had less than a 1.5 month supply of condominiums. And while the general condo market had shown an 8 percent increase (estimated) in median pricing, eight of the 10 markets I chose had done better.
In summary, I think South Boston is wicked hot, Brookline is scalding – but as far as Cambridge is concerned, somebody get an extinguisher, because that market is on fire. As far as Greater Boston neighborhoods go, Cambridge is my hottest market.
Most folks may not know that Cambridge is the neighborhood in Greater Boston with the largest condominium market. In the first six months of 2013, Cambridge had over 400 condominium sales, which – in terms of transactions – means it’s about twice the size of Back Bay or Somerville condo markets, and has around 50 percent more transactions than the South End or South Boston condominium markets, both of which are very large markets by Boston standards.
On July 1, MLS showed that Cambridge’s for-sale condominium inventory was just one-third of what it was a year ago and incredibly just one-fifth of what it was two years ago. Yet, despite the lack of inventory, this year’s Cambridge condo market has 27 percent more transactions than the first half of 2011; and, perhaps because of the lack of inventory, the Cambridge condo market’s median sales price was 16 percent ahead of the first half of 2011 (my calculation based on MLS analysis).
I asked Max Dublin, an eight-year veteran of Cambridge real estate, to describe this year’s market. He responded, “The word I keep coming back to is ‘crazy.’ I’ve never seen anything like this. I tell all my buyers you’ll probably have to go 5 to 10 percent over asking and waive some or all your contingencies to have a chance.”
Simply put: It’s true! My breakdown of this year’s MLS sales shows that through June 2013 nearly half of Cambridge’s condominium sales sold for more than the list price. Additionally, 49 Cambridge condos garnered at least $40,000 over-ask, 32 condos went for at least $50,000 over ask, eight Cambridge condo sellers received at least $100,000 over-ask and one buyer, the buyer for 975 Memorial Drive #601 paid $200,000 over-ask.
Ironically, the West Cambridge single-family market is the only market I found where the over-ask offers are even hotter than the Cambridge condo market. In the West Cambridge single-family market, five of nine first-half sellers accepted offers of at least $100,000 over-ask, three accepted offers at least $300,000 over-ask, and one, the seller of 66 Sparks St., accepted $1.3 million over-ask.
Think Fast
In Cambridge in 2013, they’re selling condos faster than the agents can list them. Through June, 562 Cambridge condos had been listed and 563 had reached under-agreement status. How much longer can it go on for? “Easily another six to 12 months,” Dublin predicts.
A second market I’m calling one of Boston’s hottest is new construction. My analysis of MLS sales and on-market inventory for July 1, suggested an absorption rate of about one month for Greater Boston’s newer constructed condominiums. Yet, with new construction, developers typically keep the bulk of units off market until there is something to show. In other words, the absorption is much hotter than MLS reveals. In fact, as we’ll see, adding new development to a hot market is a recipe for spontaneous combustion.
For example, in Midtown, with nothing but a steel frame and interactive computer program, Millennium Place put more than half its 256 units under agreement. Not one of the 130 units had hit MLS.
In the South End, a ground-up project at 518 Tremont St. showing little more than ground, put five condos under agreement. All with list prices topping $3 million. An incredible feat considering in the last five years the entire South End condominium market had sold only four MLS listed condominiums for $3 million or more.
And in South Boston, a 39-unit development at 1st and M Street sold out before a model unit could be built. Even though the project’s average ask, around $500 a square foot is considered premium pricing in Southie, Jacob Carlin, the listing broker and a 10-year veteran of the South Boston market said, “People are basically giving you full price without even seeing the unit complete.”
Susan Piracini, the listing agent for a Brookline development project, echoes the same sentiment. This is the first time she has seen buyers provide non-refundable deposits without being able to see anything. There is no model unit or finished condos at the development she represents at 321 Hammond Pond Parkway either, yet 14 units of the 27-unit development are under agreement. As for pricing, the development, non-refundable deposit and all, is commanding $544-$676 a square foot, not even 12-months after the final unit of a nearby project sold for $463 a square foot.
David Bates is a broker with Gibson/Sotheby’s International Realty and author of The Bates Real Estate Blog, www.BatesRealEstateReport.com
