9 Responses to “Boston Downtown Condo Market” »»

1. Paul C
   Comment by Paul C | 03/22/10 at 5:51 am

   John, did you see the Boston Globe real estate blog story?

   Sorry luxury condo haters, downtown Boston is different

   http://www.boston.com/realestate/news/blogs/renow/2010/03/sorry_luxury_co.html

2. Mike
   Comment by Mike | 03/22/10 at 6:14 am

   Seeing as how he was quoted in it, I’m assuming John’s aware of the article….-grin-

   Nice ink John!

   Mike

3. John Ford
   Comment by John Ford | 03/22/10 at 6:22 am

   Mike, When reporters call I provide them with the sales data…sometimes it’s positive.

   Mike, what’s your take on the Boston luxury condo market?

4. Boston Broker
   Comment by Boston Broker | 03/22/10 at 6:30 am

   John, unless you blog about negative real estate reports, certain readers will never be happy. Keep the positve reports coming.

5. Mike
   Comment by Mike | 03/22/10 at 9:00 am

   Hi John –

   The luxury market’s a toughie. The dynamics of large scale residential real estate development are quite a bit different from private individual sales of properties. One very important difference is the real estate developer is usually hyper-sensitive to the “cost of carry” – the interest they’re paying out on construction loans while they wait for sales to occur. This is in contrast to a private seller, who is usually more in tune to the raw price at which they bought and focuses on that as their yardstick for success.

   I think several developers got stuck where they made their business plans factoring in bull market pricing for property, and are having a hard time achieving those prices. It’s telling that multiple projects have gone under the auctioneer’s gavel, at pretty substantial price reductions. The buyers of those properties, however, will be participating in the resale market and will likely be loathe to take a loss.

   The upshot? Individual sellers refuse to take a nominal loss, even if they’re bleeding red on interest and expenses (psychology of loss avoidance at work). So the market prices don’t adjust downward to a new equilibrium, they (and the market) just freeze as buyers refuse to pay peak prices. If you take the new construction auction sales (which were likely driven by a bleak assessment of pure finance considerations) and remove them to leave private sales (driven by loss avoidance), I think you’ll see two different markets emerging, one of which will be much less healthy than the other.

   If the only way new construction can sell is if they drop their prices 20-30% via an auction, does that imply the only way a private seller can sell is to drop their prices 20-30%? That doesn’t sound too “en fuego” to me even if volumes are on the uptick.

   Take a look at Folio. People bought there on average 28% below original asking. And here we are more than a year later and some of those properties are still re-selling for less than the auction price. Ouch.

   Is the market coming back? Yes, but it’s because financially motivated businesspeople are lowering their prices to move product. It’s not because sellers are rushing out to pay top dollar for properties. This does not bode well for the private seller. And once the businesspeople sell their inventory (perhaps at reduced prices) I’m not so sure the private sellers will do what it takes to sell and the market will stall again. Just keep watching inventory for spikes, it should tell the story.

   Mike

6. John Ford
   Comment by John Ford | 03/22/10 at 8:39 pm

   Mike, well thought out comment – thanks. I’ll keep my eye on inventory and keep you updated with blog posts.

7. Mike
   Comment by Mike | 03/23/10 at 6:01 am

   Hi John – FYI, national sales data is out for February, and it’s not good. The quote:

   “Inventories of sales on the market jumped during February, rising 312,000 to 3.59 million, the highest since September. Yun said the January-to-February increase in inventory was much larger than usual in February. The inventory data are not seasonally adjusted. ”

   I’m very interested to see that February number (and other key data) for MA.

   http://www.marketwatch.com/story/existing-home-sales-fall-for-3rd-straight-month-2010-03-23

   Mike

8. John Ford
   Comment by John Ford | 03/23/10 at 6:36 am

   Mike, I’ll have inventory stats for you today or by the latest tomorrow.

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