I make it a point to regularly attend forums and events designed to offer news and insights on the Boston real estate market. At a seminar last week sponsored by Banker & Tradesman and the Massachusetts Association of Realtors, I had the opportunity to hear a senior economist with the Federal Reserve Bank of Boston and a panel of experts address the outlook for residential real estate in the area.
While Keynote speaker, Alicia Sasser Modestino with the Federal Reserve Bank of Boston indicated that Massachusetts has fared better than other New England states, it has not fully recovered from the recession. In downtown Boston, however, prices never fell as much as in other metropolitan cities. According to data aggregated by Otis & Ahearn Real Estate, the firm with which I’m affiliated, prices in the downtown Boston condominium market dipped to their lowest point in 2009, with average sales of $577,508 and median sales of $390,000, and have rebounded to a record level, with average sales at $823,907 and median sales of $528,000, up 11% and 3.5% year to date respectively versus a year ago, and up 43% and 35% versus the same period in 2009.
This is great news for sellers. This environment, though, requires that buyers are well-informed, know what they’re looking for, and are prepared to act quickly when they see the Boston condo that’s right for them.
Panelist Richard Goulet, president and founder of the Appraisers Group in Belmont, conveyed that the shortage of home sales in recent years has made appraising more challenging because there are fewer comparable sales. Today’s stringent lending practices require more comparable sales data in situations where there is a five percent or more difference between the appraisal and the selling price. In the past, appraisals were based only on actual sales, but to obtain a better picture, appraisers are now including data for properties that are under agreement and may be looking to brokers for guidance on market values.
Mark Leff, senior vice president of construction lending at Salem Five Bank, another panelist at the forum, affirmed that the cost of construction materials has risen 31 percent and labor costs are increasing, too. These expenses will drive up the cost of new condos being developed in Boston and these costs are likely to be passed on to consumers.
Richard Goulet also spoke to the current trend of bidding wars, given the today’s low inventory. Many of my colleagues in attendance attested to the buyers’ frenzy where condos are being scooped up within 24 hours after listing, the dearth of inventory is at its lowest level in years, there are a number of cash buyers in the market and, if financing, buyers need to be armed with financing pre-approvals when submitting an offer. Of the 178 recorded closings over the six weeks ending 3.1.13, more than half of these transactions were cash deals. Kevin Ahearn, President of Otis & Ahearn, commented: “Everything is selling. It’s not so crazy if it’s around $3 million, but if it is under $1.5 million and well-priced, it is selling right away.”
Without a doubt, the Boston real estate market is going gangbusters. Do you have any questions about the outlook on the residential market in the city? I would be glad to share my insights and perspectives.
Click here to read my second quarter update on the downtown Boston real estate market.