For the first time in a generation, the suburbs are hot and the downtown Boston condo market is not.
Emblematic of this new and slower sales market is the Grand Penthouse at the Millennium Tower, which, with a whopping $45 million price tag, has sat on the market, unsold, for more than 600 days now.
Overall, the number of luxury condominiums languishing on the market has risen sharply, while prices have fallen as well.
Given the coronavirus and the steep economic downturn, it might not seem all that surprising.
Yet it bucks the trends in the suburbs of Greater Boston and other parts of the state. Strong demand from buyers helping push up prices of single-family homes – the dominant type of housing outside the city – at a time when the number of homes on the market is actually shrinking as some sellers get cold feet.
The median price of a single-family home in Massachusetts hit a record $440,000 in June, according to The Warren Group, publisher of Banker & Tradesman.
All of which begs the question: Is the Great Boston Luxury Condo Boom finally over, or is it just taking a breather?
“Many buyers are waiting on the sidelines to see how the economy unfolds and do not have a sense of urgency with respect to buying and selling,” said Neda Vander Stoep, a top broker with Coldwell Banker’s Back Bay office. “As we move forward into the fall season with COVID on everyone’s minds, it will be interesting to see how the fall market reacts, especially heading into election cycle.”
Median condo prices in downtown Boston fell by 4.3 percent in the second quarter, sliding to $926,000 from $968,000 a year ago, according to The Warren Group, while the number of units on the market has jumped by more than a quarter according to market tracker LINK.
And the luxurious top end of the Boston market, where prices have pretty much kept on keeping on rising higher for two decades now, has also take a hit, with the number of unsold multimillion-dollar condos, like the Millennium Tower penthouse, having multiplied.
After two decades now of breakneck construction, it is a market that encompasses nearly 60 different properties, from skyscrapers like the 60-story Four Seasons tower and the Millennium Tower to waterfront high-rises like 50 Liberty, Battery Wharf and the Intercontinental on the waterfront, to posh boutiques like the Le Jardin.
Almost all, barring a few exceptions like Rowes Wharf, have been built in the last quarter–century.
Inventory, or the number of unsold condos sitting the market, has also surged, unlike in Boston’s suburbs.
The total number of units on the market was roughly equal to last year through mid-June, when it suddenly surged ahead of last year’s pace.
By the middle of July, the number of condos on the market in Boston as a whole, as opposed to downtown, was approaching 1,300, or roughly 25 percent more than the same time in 2019.
The same trend is evident in downtown Boston, which had 830 condos sitting on the market at the end of July, compared to 597 the year before.
And while the 600-plus days the Millennium Tower penthouse has sat on the market may be a bit of an outlier, with more for buyers to look at units at the deluxe top of the Boston condo market are sitting for longer. Days on market in that segment jumped more than 22 percent to an average of 133, or nearly four and a half months.
“You are seeing a rise in inventory in the downtown neighborhoods,” said David Crowley, a strategic real estate advisor at One Boston Luxury Living|William Raveis Boston, though he’s skeptical on how much impact on prices it is having.
Wealthy Buyers Cautious
So, what’s behind these troubling numbers?
Certainly, buyers have become more cautious in the wake of the coronavirus and a sharp downturn that has bestowed Massachusetts with the dubious distinction of having the nation’s highest jobless rate, at over 17 percent.
“In unstable times, residential real estate buyers tend to be risk–averse. So, I would think that would impact some new product as well as some less–established markets,” said David Bates.
After rising for years, the price of Boston condos put under agreement actually fell in the first quarter to $639,000, a drop of $10,000, according to Bates, a broker associate at William Raveis’ Back Bay office and author of a blog on the local real estate market.
The deadly virus has also sparked a reassessment, not just on part of buyers, but also downtown condo owners, of the pros and cons of urban life.
There has been plenty of chatter about well-heeled city dwellers, especially professionals with young children who were part of the back-to-the-city movement, suddenly discovering the merits of the suburbs or even Cape Cod, including more space to roam in an age of confinement and lockdowns, whether it’s local parks and nature reserves or simply a backyard to decompress in.
“Families with multiple children who have been ‘making it work’ in small two- or three-bedroom condos are saying, as a result of the pandemic, ‘Ok, it’s time,’ Brian Dougherty, managing director of the Compass office on Newbury Street, told Banker & Tradesman in an email. “With parents working from home and less sensitive to commuting times, the suburbs are doing exceptionally well.”
On top of it all, a steady drumbeat of high-end construction has flooded downtown Boston with thousands of new luxury units, both condos and rental. While the city and the state as a whole have struggled to build enough housing, residences for the well-off and outright wealthy is one base that has been well–covered.
It’s too early to say whether the downtown Boston condo market is truly headed for a tumble.
But for the first time in a long time, the suburbs are giving downtown as run for its money, and It’s starting to show in the numbers.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at email@example.com.