Has the real estate downturn finally reached the Bay State’s elite suburbs and resort areas?
For a couple years now, such perennial real estate hotspots like Wellesley, Weston and Nantucket have appeared to be living in an alternate real estate universe.
While home values were getting hammered in places like Dedham, Framingham and Woburn, homeowners in these and a handful of other upscale towns and communities saw their property values continue to soar.
No more.
In a sign that the worst real estate market collapse since at least the early 1990s may be finally reaching into ranches and McMansions alike, median sale prices are now starting to fall as well in some of these coveted ZIP codes.
Of course, this may not be all bad. For starters, lower prices may finally open up some of these towns to buyers who had been locked out before. Moreover, with the real estate market finally showing signs of hitting bottom, the top-tier towns are not likely to see anything like the years of falling prices endured by their less affluent suburban neighbors.
Sanity Returns?
Still, it’s a shift, and a potentially significant one at that. It follows on the heels of reports that Boston’s luxury condo market is also finally seeing prices fall after years of upward pressure.
At the least, maybe some sanity is finally returning as well after years of ever more unreal home prices in some of these elite towns.
For what it’s worth, Karl Case, the Wellesley College economist and nationally-known housing market expert, tells me he’s skeptical of the idea that things may be getting worse in the suburbs.
Still, the decline in the median sale price in some of the state’s real estate hotspots might be a sign that the more expensive properties are not moving as quickly now, he noted.
“It’s true that prices are down everywhere,” Case said. “The high value properties are not moving as much.”
Well the numbers sure do look interesting.
Weston, which saw median home prices soar well past the $1 million mark over the past year, is now settling back to Earth – and fast at that.
The median price has dipped to $980,000 by the end of March, down from $1.5 million a year ago, according to The Warren Group, publisher of Banker & Tradesman. In a double whammy, home sales are off by roughly 50 percent, with just 14 transactions so far this year.
It’s hard to get too teary eyed, though, with one five-bedroom fetching nearly $2 million. Now there’s a bargain.
The same story can be found in Wellesley, where, shocker, median sale prices have also fallen below $1 million. In fact, the median has fallen to a very slummy $899,500. Total home sales so far this year are also down by half, to 26.
A similar dynamic can be found another high-priced stalwart, Newton, where the median price is down by roughly a percentage point, to $734,000. Sales are also down by more than 30 percent, with 55 homes sold so far this year.
But if you really want to do some high-end bargain hunting, look off-shore to Nantucket, the traditional getaway spot for very loaded corporate bigwigs who value their privacy.
If it seemed like prices would never fall there, think again. The median sale price has plunged more than 20 percent over the past year, down to $1.6 million. Home sales have also fallen by more than half, with just 11 so far this year.
The falloff in prices in the higher-end communities is far from universal, with home values continuing to rise in Brookline and Cambridge, the latter still firmly above the $1 million mark.
So why, with the real estate market showing some tentative signs of life, are prices starting to level off a bit in some of these elite communities?
Well, it’s the economy stupid.
The real estate downturn, until last fall anyway, was a story of hapless buyers stretching to buy homes they couldn’t afford with crazy subprime loans. When the bubble burst and the economy began to weaken, this led to a deluge of foreclosures.
Towns like Wellesley and Weston, where wealthy investment executives plunked down gobs of cash and borrowed the rest from mainstream lenders, were fairly well insulated from the initial stages of the market meltdown.
Of course, all those bad subprime loans, even if they were rare in towns like Weston and Wellesley, were securitized and sold off. And last fall, they came back to haunt us all, in rich town and poor, infecting the world financial system and helping bring on a near collapse of the global banking system.
That, in turn, worsened a slowdown into the nasty recession we are grappling with right now.
Far from being insulated this time around, the elite towns are also now suffering as mutual fund companies and hedge funds trim their highly paid staffs.
Those who still have their jobs have seen their investment portfolios plunge in value.
To sum up, there are just fewer buyers out there with the cash and appetite right now to take down big homes in expensive towns with gaudy price-tags.
The Right Medicine For Sales
A similar phenomenon is also taking place in Boston’s vaunted luxury condo market, where the median sale price of the city’s most sought after units fell nearly 20 percent in the first quarter to $560,000, the Listing Information Network, or LINK, reports.
But declining prices are far from a sign the sky is falling. In fact, it may be just the right medicine to get sales moving again in some of the top-tier towns.
Painful as it has been, the real estate downturn has brought back to Earth home prices that were spiraling to unsustainable levels in many towns.
It’s hard to argue that towns like Wellesley and Weston couldn’t use a little price adjustment as well.
