Condo Sales in Massachusetts Decline More Than 10 Percent

From Banker and Tradesman Online
January 22, 2007
By Aglaia Pikounis

After two years of substantial growth, the condo market took a breather last year, with unit sales dropping more than 10 percent statewide and prices slipping slightly.

A total of 30,203 condominiums were sold in Massachusetts in 2006, a 12.89 percent decline from 2005, according to statistics released today by The Warren Group, parent company of Banker & Tradesman. The statewide median selling price for condos last year fell 1.2 percent to $275,000

The drop in activity is a sharp contrast to the last two years, when the condo market saw double-digit percentage gains in sales and robust price gains. Condo sales jumped about 12 percent in 2005 from the prior year and sales were nearly 19 percent higher in 2004 compared to the year before.

“We had a normalization of the market. The market had been heated up over the last couple of years,” said Larry Rideout, owner and general manager of Gibson Sotheby’s International Realty in Boston. “Prices didn’t go down as much as everyone – the media – anticipated.”

Condo sales in recent years have been fueled by demand from aging baby boomers seeking a more carefree lifestyle and first-time buyers who couldn’t afford surging single-family home prices, according to longtime Realtors.

A significant portion of boomers searching for condos have a home they need to sell and as the single-family home market softened and homes took longer to sell, some of them put off their purchases, industry watchers say. Meanwhile, first-time buyers, who may have thought that buying a single-family home was impossible, paused as they saw a growing number of for-sale homes to choose from and prices begin to ease.

With the availability of undeveloped land shrinking, parts of the Bay State have seen a jump in new condo development as builders try to maximize the number of units they can build, explained David S. Drinkwater, president of Grand Gables Realty Group in Scituate.

In Boston – which saw a flurry of new luxury condo sales later in the year with the opening of the Residences at the Intercontinental along the Fort Point Channel – some neighborhoods
experienced gains while others saw sales plummet by 20 percent or more. Overall, sales in Boston fell 9.6 percent with a total of 6,588 units trading this year compared to 7,286 in 2005, The Warren Group reported.
In central Boston – which includes the South End, Back Bay, Beacon Hill, the waterfront, Fenway and other downtown neighborhoods – sales were off by only 1.4 percent and the median selling price fell 4 percent to $489,000.
‘Percolating’ Market Jason Weissman, a principal of Boston Realty Advisors, said sales activity remained strong in tony Boston neighborhoods like Back Bay and Beacon Hill because there wasn’t a significant spike in the number of condos available for sale.

“Volume and prices may have been off statewide, but in areas like Back Bay and Beacon Hill, prices really held and there were slight gains in volume,” he said. Some 544 condos in the Back Bay and Beacon Hill were sold last year with an average price of $822,276, compared to 541 condos that were sold in 2005 with an average selling price of $809,275, according to Weissman, who cited information from MLS Property Information Network.

Still, sales volume declined by 22 percent to 33 percent in neighborhoods like Allston, Brighton, East Boston, Jamaica Plain and Roxbury. In Brighton, 476 condos were sold, a 22 percent drop from the prior year, while the median selling price dropped a modest 1 percent to $271,750.

In Roxbury, the median selling price dropped 6 percent to $354,500, and sales were off by 24 percent.
Matt Bless, broker-owner of Vanguard Realty in Brighton, said properties took twice as long to sell. The average market time increased from 30-45 days to 60-90 days, he said.

In Brookline, a community that Bless’ office serves, properties that normally went under agreement within two weeks were taking about two months to sell. Constant news reports about the real estate market affected buyers and sellers, according to Bless.

“Because there was so much publicity about the state of the market and the death of the seller’s market, there were buyers who started to have unrealistic expectations about how much of a discount they could get,” he said.
“I find the market is percolating and coming back to life. We’ve gotten a lot of inquiries. A lot of people who were renting last year and decided not to buy, it seems like we’re getting calls from them again saying ‘now I think I want to buy,’” he said.

While condo sales cooled in Brighton and other sections of Boston, sales jumped 34 percent in Dorchester last year. A total of 862 condos were sold in Dorchester and the median selling price climbed 5 percent to $288,900.
Rideout, of Gibson Sotheby’s International Realty, said Dorchester may be benefiting from home seekers priced out of the South End and Back Bay.

In other parts of the city, some in the industry were stunned when an auction took place in the fall for Folio Boston, a new development in the city’s Financial District. “The Folio was kind of [in] a fringe market. That was a unique property location that was definitely an untested product. The numbers that they were reaching for, I think, were difficult to achieve for a new residential neighborhood,” said Weissman.

Outside of Boston, steep drops in sales occurred in Essex County, where the 3,564 unit sales were 21.86 percent lower than a year earlier, and in Norfolk County, where 3,055 condos were sold – a 19 percent drop from 2005, according to The Warren Group.