January
2007
Luxe downtown condos skirt housing bust
Sales at near-record level in flush year for many on Wall Street
By Kimberly Blanton, Globe Staff | January 6, 2007
Massachusetts real estate may be in the midst of its steepest downturn since the 1990s, but luxury condominium sales in downtown Boston barreled along at near-record levels, according to preliminary 2006 estimates released yesterday by Otis & Ahearn, a Boston brokerage firm.
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Both sales of $1 million-plus condos and sales of condos costing more than $1,000 per square foot will approach 2005’s record sales in Boston’s high-end market, the firm said.
“The accumulation of wealth has been dramatic,” said Kevin Ahearn, president. “We’re seeing it in the stock market, and we’re seeing it in the condominium housing market.”
Empty-nesters and well-heeled young professionals and couples are snapping up contemporary units with their full complement of amenities, from reserved indoor parking spaces to Italian marble bathrooms overlooking Boston Harbor or the Charles River, real estate agents and economists said. Responding to the demand, developers have added thousands of luxury units downtown in recent years. Construction continues, but has slowed from the pace of recent years. Two major developments under construction, The Residences at Mandarin Oriental on Boylston Street and the Residences at Battery Wharf, are slated to open in 2008, Ahearn said.
The overall downtown condo market peaked in 2004, with 4,670 sales; the number of units sold is expected to be about 19 percent less in 2006 when final numbers are tallied. In contrast, sales over $1 million peaked a year later, at 388 units, and are expected to approach that level in 2006, the firm said.
Prices of luxury units also have held steady. The median price for million-dollar-plus condos in 2006 was $1.4 million, roughly equal to 2005’s median, the firm estimated. Statewide, the median sales price for a single-family home fell 4 percent in the past year, to $340,000, while the median condominium price was up 2 percent, to $270,000, according to November figures released by the Massachusetts Association of Realtors. The association also reported that sales of single-family homes fell 13 percent in the same time period.
Strength in the downtown market isn’t easy for economists to explain, but mortgage interest rates provide a clue. Wealthy buyers are more likely to pay cash for all or a large share of their property, making them less sensitive to rate hikes that dampened demand among middle-class buyers over the past year.
Larissa Duzhansky, an economist for Global Insight, a Lexington consulting firm, said hefty paychecks for money managers and other executives in Boston’s financial center, coupled with a strong economy, also fueled million-dollar sales. The Dow Jones industrial average, an index of blue chip stocks, surged 16 percent last year.
In Boston, “You’ve got State Street; you’ve got Fidelity; you’ve got Putnam, and Bank of America,” Duzhansky said. Employees at those corporations “might be saying, ‘I just had a really good year in investing, and this might be a good time to buy something, and I might buy it for cash.’ “
There were still soft spots in the high-end market, especially in the latter half of 2006. The developer of FolioBoston, a condo project in the Financial District, decided to quickly auction off his remaining, unsold condos on a Saturday afternoon in October, rather than risk slogging sales in an uncertain market.
And wealthy buyers are discerning, shunning condo projects that lack parking or preferring large, one-floor units in new buildings to large condos spread over three- or four-story brownstones that require them to walk up and down the stairs of historic buildings.
“It seems like the resale market is down” for condos in existing buildings, “but the new construction market is still holding strong,” said Beth Dickerson, who has catered to Back Bay buyers and sellers for more than 15 years.
“We had some slow periods in 2006 but at the end of the year, when you look at the numbers,” she said, “it’s all still good.”
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