I almost choked on my Cheerios® at 3:00 AM yesterday morning, while reading an article in the New York Times entitled, “Buyers Scarce, Many Condos Are for Rent”.
Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed. Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling.
Collapsed? Trickle? Mushrooms?
That’s news to me.
Reliable data shows a much healthier condo market, than the reporter implies, in Boston and throughout Massachusetts.
According to The Boston Globe, 12/26/2006:
Condo sales [in November 2006] fell by 10.1 percent from November 2005, but the decrease was not as steep as it had been in the previous four months, when sales dropped between 19 and 28 percent. Statewide, the median condo sale price was $269,900, a dip of 1.8 percent.
Last month, 2,222 condos were sold in the state, an amount that is less than comparable months in 2004 and 2005, but that exceeded all other November sales dating back at least to 1987.
Does that signify a collapse? Does it even hint of one? Does it sound as though sales have “trickled” to you?
I was very surprised by the article. I found the majority of it easy to believe, since it was focused mostly on the slow real estate markets in Washington DC, Miami, and Las Vegas. The glut of inventory in those cities has been well-documented.
Boston is different. (That’s actually another issue I have with the story; it keeps saying “Boston” when I think the reporter means “Greater Boston” or even “Massachusetts”. The two real estate markets are completely different. Boston is way different from the suburbs. Way.)
There were two major points to the article. One, that there is a glut of inventory in many major cities; and, two, that many condo conversions are being put on hold, and many units being turned into rentals, instead.
Which, again, was news to me.
Industry analysts also point out that rents may start sagging if too many condos are converted into apartments too quickly …
“You can do it, but it isn’t as attractive,” Tom Meagher, a Boston real estate consultant, said about converting condos into apartments. “You are not going to get enough rent to cover the cost. You might have to go back and redesign the floor plans.”
In the Boston area, Mr. Meagher is tracking 600 condo projects representing about 49,000 units in various stages, from applying for permits to active construction. While the recent slowdown is forcing developers to consider converting their projects to apartments and offices, he expects as many as a third of them will never be built at all.
Six hundred condo projects??????!!!!!!!!! It’s 1986, all over again!!!!!!!!!!
I guess if “Boston area” means from Nashua, New Hampshire to Providence, RI, then there might be 600 condo projects.
Within the city of Boston, however, there might be 30 major (more than 10 units?) projects under construction, with another 30 ready to go. I don’t know how many are winding there way through the permit process, but if I don’t know about them, then they’re pretty far off from breaking ground.
I was so flipped out by what I read that I immediately sent a note to Tom Meagher, who is an expert in the business (why else would the Times have interviewed him, right?). (No, seriously, he is an expert.) (Information about Mr. Meagher and his company, Northeast Apartment Advisors, can be found, here.)
Surprisingly, he responded, immediately (I asked him in my email if I could quote him, and he didn’t say one way or another, which is good enough for me!). (Bold emphasis, mine.)
I was very surprised. I told Vikas [the Times reporter] that developers almost never walk away from projects in the Boston area because they can take 5 to 10 years or more to do. The only reason they would is if their site control can’t be extended. Projects in the Boston area are virtually never canceled outright I told him.
We also never discussed the collapse of the Boston condo market and I agree with your point that there are two markets city and suburban. Our Boston Cambridge Condominium Report which will be out within the week, focuses only on the urban component.
I think collapse may be closer to the point in DC, he started there and probably tried to extrapolate.
There you go.
Again, I was very surprised by the Times article, because I don’t think it came off well-researched. Or, should I say, well-reported.
Complete story: Buyers Scarce, Many Condos Are for Rent – Vikas Bajaj, The New York Times