If you could go back to the year 2000 and buy a condo in Boston, would you? Does it make sense? Are prices up, or down? When was the peak? What's going to happen in the next few years? These are all common questions I've been getting a lot of recently so I want to answer them and produce an ongoing quarterly market analysis to keep you on top of the market. I am still working on a final quarterly report for Q1 2009 (plus the past 9 years or so), but I wanted to provide a little "preview" here first.
What is the "Boston Market"?
The Boston condo market is actually quite different from what you hear on TV or read in the news about the "Boston market". What the news most often refers to is the Boston area real estate market and usually reflects single family home stats, not condosin Boston itself. Not that any of those stats are necessarily incorrect or untrue, but there is a difference (sometimes vast) between the perception of what those stats are showing and what is actually happening in a specific town or neighborhood. I am producing this report to show the actual Boston condo market in a clear and concise way (as best I can at least!). I will be posting parts of the report over the next week or so until I am ready to release the entire report in pdf form. It will include full metrics and stats on different segments of the market (sub $500K vs $1M plus for example), different neighborhoods, bedroom and size breakouts, etc.
Tomorrow, I'll have some neighborhood level data, and following that I should have a breakout of the luxury market segment (if you haven't subscribed yet, and want the latest updates without having to check back on the site every day, you can do so by RSS Feed or subscribe by email, hint...hint!).
So without further ado, how does the Boston condo market shape up? (FYI: for a little perspective, the Dow was at 11,500 in January of 2000 - it's now at about 8000 or about 30% decline).
Citywide Boston Condos (all neighborhoods)
Here's a chart of citywide Boston condo median prices and average price per square foot since 2000:
You'll see that the peak of the market was in 2005 for the Boston citywide (all neighborhoods) market, with a bit of a decline into 2006 but relatively steady prices from 2006 thru 2008. There is a clear sharp decline in the 1st quarter of 2009 (to date) which is clearly a result of the steep slowdown in market activity throughout the fall and winter due to the economic chaos after the financial meltdown last year (although we are showing some signs of economic recovery at this point).
This chart shows median prices and number of sales over the last 15 months to "zoom in" a little on the recent market. As you can see, activity for Q1 was very slow (transactions down by about 26% compared to Q1 2008) and prices were in steady decline through the fall and winter. Although a seasonal winter slowdown is normal, this was a pretty steep decline in prices and transactions, again led by the very weak economy. However, recent real estate activity has been bouncing back - not just as seen in the March data above, but also as seen "on the street" anectodally right now. Buyers are out looking, still somewhat hesistant at this point and hunting for bargains, but the "spring market" does appear to be picking up momentum. We'll see if it continues (I suspect it will - especially in the lower priced segments - given all the economic stimulus being pumped into the economy).
Downtown Boston Condos
*downtown is comprised of the Back Bay, Beacon Hill & West End, South End & Bay Village, North End & Waterfront, and Fenway/Kenmore neighborhoods)
As you can see, the downtown Boston condo market is clearly much higher priced (+-25% higher) than the citywide market, and has shown a remarkable resiliance to the real estate downturn that has affected most of the country. Prices have stayed relatively flat without any drop since 2005 (until this year, but as I said, it's still early to see how the entire year will turn out price wise). A part of that overall stability is due to the increase of the "luxury condo" component ($1M+) as a percentage of overall sales. It increased from about 7% of the market in 2003 to nearly 19% in 2008. However, there has been some recent weakness in the luxury and "super luxury" market ($2M+), and with more than 20 months of inventory for sale in that higher segment, there is a clear over supply of expensive condos in Boston at the moment. The large loss of wealth in the financial markets has not helped. I don't anticipate big price drops across the board for individual sellers or some of the new developments on the market, but it will take a while to clear the inventory and sell those units. I'll get into more detail on this segment in a post in the near future.
Now for the monthly chart. Although there was a spike in median prices in October (due the Mandarin luxury condo building in the Back Bay being completed and the subsequent closings that month, many of which were "under agreement" for a long time), the downtown Boston condo market shows the same general trend as the citywide data shows - for the same reasons in my opinion.
I hope that sheds some light on the Boston real estate market since 2000 and over the past year or so. As I mentioned, say tuned for more data over the next week of so while the rest of my Boston condo report is compiled into a final downloadable version.
What are your thoughts? Comment below!