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Boston condos state of the market

The average condominium in the United States sold for above its price tag for the second month in a row in June, signaling renewed demand following a slump in sales fueled by the COVID-19 pandemic.

Redfin reported this week that the typical condo sold for 0.7% more than its asking price last month. The month before, condos sold at a 0.4% premium. In all, 42% of condos sold in June went for more than their list price. And the prices are rising too, with the median condo sale fetching $304,000 in June, a massive 20.3% gain from the same month one year ago.

Daryl Fairweather, chief economist at Redfin, said the current trend is quite a contrast from back in 2012, when the average condo was selling for 4% less than the asking price.

As to why buyers are increasingly targeting condos, Fairweather said the most likely reason is that they’re being snapped up by those who have been priced out of the market for single-family homes, which have been in huge demand for over a year now. She noted the median sales price for a single-family home was $405,000 in June, a record high.

“Earlier in the pandemic many buyers shunned small condos in favor of large detached homes that have space for offices and homeschooling,” she explained. That trend accelerated due to stay at home orders in many parts of the U.S. People didn’t want to confined to a small box, and that prompted many to look for larger traditional homes.

“But now that many Americans are vaccinated and some are returning to the workplace, extra space isn’t as necessary and the benefits of shared amenities like a gym or a pool are more attractive,” Fairweather said. “And the biggest benefit of condo living is the more affordable price.”

Redfin offered more evidence of the growing demand for condos. In June condos sold at their fastest-ever pace, with the average unit going under contract in just 22 days. That’s almost less than half the 43-days the average condo spent on the market a year ago. It’s also way faster than the 39-day period condos spent on the market in June 2019. Redfin says that’s a better comparison because it was before the market was impacted by the COVID-19 pandemic.

Just about every metric shows that condos are a prime target for buyers. Seasonally adjusted condo sales jumped 59.7% in June compared to the year before, while pending sales were up 38.2%, Redfin found. The overall number of condos for sale at the end of June was down more than 18% from a year ago, while total new listings rose by 7.6%.

Fairweather said the fact that new listings are up while overall supply is much lower shows that demand for condos is incredibly high. “Condos are selling quickly,” she said.

Boston condos state of the market

I was asked, “Can you sum it up in one sentence?”

Yes – the inferior Boston downtown condos won’t be selling as fast, or for as much, as the superior Boston downtown condos for sale.

There should be a gap – a sizable gap – between inferior and superior homes. But over the last year, it got squeezed and those who were selling inferior homes really made out nicely. Not only did they sell quickly, they didn’t have to discount much, if at all.

Inferior Boston condos for sale will be sitting around longer as Boston condo buyers catch their breath.

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Boston condos state of the market

Boston condos state of the market. I already guessed that the runaway frenzy of the Boston real estate market will start to temper in June. Here are some reasons:

  1. Some of the craziest demands have been satisfied.
  2. Other Boston condo buyers will take a break and go on vacation.
  3. Overly-optimistic pricing by some sellers will stall the Boston real estate market
  4. It’s been red-hot for 10-12 months.
  5. Once we see job numbers improve the FED will raise interest rates

Covid-19 has been blamed for why many potential downtown Boston real estate sellers have delayed their plans to sell. But now that the pandemic is wrapping up and sellers have had a +20% gift of appreciation dropped in their lap, you’d think they would be flooding the streets with inventory?

But there’s no flood yet. Downtown Boston condo inventory is increasing, but very slowly.

Could more Boston condo inventory be arriving?

Sellers have the most ideal market conditions of all-time to sell their home, yet they are holding back.

If we do see a slowdown this summer, it won’t be because of a flood of inventory.  It will be due to prices having gone completely bonkers – price will fix anything!

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My thoughts: I read a comment somewhere that potential Boston condo buyers were going to wait until sales volume had increased to prior years’ levels to show that the market was recovering, and at that point re-enter the market.

First, I don’t think that day will ever come soon. Sales volume in an over-heated market of the past several years was driven by too many people selling to move up after just a couple of years of ownership. I don’t think that’s going to happen again.

Second, does that make any sense? Yes, it’s indicative of the “health” of the market, I guess, but at the same time … do you really want to be competing against all those people, once again, for the “good” listings?

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