Sales of homes over $1 million are outpacing the rest of the housing market across the country, according to a new report from broker Redfin, with Boston ranking ninth among all U.S. cities for luxury sales. But while there are signs that some luxury markets might be headed for a slowdown in 2015, Boston may be able to escape that fate, Redfin chief economist Nela Richardson told Banker & Tradesman.
Sales of homes for $1 million and more increased by 9 percent in the third quarter across the country, while the overall market declined 1.2 percent from the same time last year. "That’s no surprise," according to Richardson’s report, given that the luxury housing market was the first to recover after the crisis and has benefited from a booming stock market, low interest rates and overseas investment.
That last factor, however, is beginning to ebb, as rising prices have made U.S. real estate less attractive. Cities like Miami and Los Angeles, which have seen heavy investor interest, are now experiencing flat or declining luxury sales. However, though Boston has had considerable interest from foreign buyers, Richardson said, much of the Boston luxury boom is tied to the city’s growing tech and biotech industries, suggesting that the luxury sales will remain strong so long as they do.
"Boston has a huge international population," said Richardson. "It’s one of those cities that’s recognized, not maybe as much as New York or LA, but it’s increasingly one of those of cities where international investors want to put their money," she said.
While there are signs that some luxury growth may be topping out in places like California, "I think in these strong emerging tech centers we will see prices continue to go up, but in specific neighborhoods – in Boston, Cambridge [and] Somerville."
Boston was beat out in the luxury rankings by some of the usual suspects – four of Redfin’s top five cities for sales over $1 million were in California, where $1 million can be the price of an average single-family home. However, more affordable cities like Chicago and Houston also saw more million-dollar sales than the Hub, in part because those cities are larger but also because it’s easier for builders to get approvals for new developments, enabling them to bring supply on line more quickly. Houston saw a 42 percent increase in sales of homes costing $1 million or more since last year; the average increase for the 385 cities that had million-dollar-home sales in the third quarter was 17 percent.
The relative lack of supply should help sustain luxury prices in Boston, however. The city’s luxury market has benefitted from a renewed interest in a more urban lifestyle, with empty-nest baby boomers wanting to return to the city competing with young professionals reluctant to leave it for the same condos, Richardson said.
The end result may be that offerings like the eye-popping $37 million listing price for the penthouse currently under construction at Millennium Place in Downtown Crossing may become more commonplace. "That is emblematic of where Boston is going – towards that New York City-type price range," said Richardson.
