Downtown Boston Condominium market condition through Q3 2011

Entering the fourth quarter 2011 is shaping up as the second best year for real estate in Downtown Boston in the past decade, trailing only the record year 2008*.  YTD transactions, sales volume, average and median selling prices are all ahead of 2010, which was a very solid year on its own.  It would be reasonable to expect new construction to pull values up as they did in 2008 but 2011 is different.

Upward pressure on pricing is evident in the market and is coming from demand for re-sale homes.  This is confirmed in the data when we compared YTD 2011 to YTD 2008.  YTD 2008 new construction sales accounted for 18.5% of the total sales volume in Downtown Boston, those sales were concentrated in Battery Wharf, The Mandarin Oriental, and The InterContinental.  YTD 2011 just 7.5% of the sales volume is in new construction buildings; The W, Battery Wharf, The Clarendon, and 45 Province, yet average and median selling prices continue to experience upward pressure.  The fact that Downtown Boston has held value through the financial crisis, great recession is a substantiation of the contrarian nature of the market relative to the National real estate environment.

*2008 Record Data Points:

1. Highest Average Selling Price
2. Highest Median Selling Price
3. Most Sales over $1,000 per square foot
4. Most Sales over $1,000,000
5. Most Sales over $2,000,000
6. Most Sales over $3,000,000
7. $1,000,000 Sales as a percentage of sales volume

Thoughts for the week 7/22/2011

Each week we highlight four key year-to-date data points as part of our weekly review of trends in the Downtown residential market.  They are: transactions, sales volume, and the average & median selling prices.  A review of the transactions and sales volume without consideration of the selling price trends may cause a consumer, buyer or seller, to misread the direction of the market.  At first view, a dip in the transaction count and sales volume might be read as a market where demand is on the decline.  There have been 1279 transactions YTD in Downtown Boston.  The YTD high point for transactions was 2004 when 2311 closings took place.  Meaning that 1032 fewer transactions have taken place YTD 2011 when compared to YTD 2004.  Of those “missing” transactions 815 are from the under $500,000 price range, 246 are from the over $500,000 but under $1 million range.  Sales over $1 million have actually increased by 30 transactions. 

Basic economic rules dictate that when fewer consumers pursue a product or commodity, the associated price for that item will decrease.  However, in Downtown Boston, prices are increasing, as noted in the chart above.  The YTD average price, $695,689 is at a record high while the YTD median price, $475,000 is second only to the high of $485,000, set in 2008.  The upward pressure on pricing is due, in part, to a lack of available inventory.  In the first quarter 2004 there were 1223 properties available for sale, in the same quarter of 2011 there were 865*, a difference of 358.  With no new for-sale development under construction (contrary to the 2005-2008 period when there were many new developments underway and proposed), expect inventory to remain at or below current levels causing continued upward pressure on pricing.      

*Inventory information compiled from LINK “Citywide” Quarterly reports.