bostonbubble.com

[john p]

When people use the words "stupendous" and "phenomenal" you shouldn't need to read the fine print... I read the attachment and couldn't find really anything that I would qualify as stupendous. It seems like the sample is small enough to have the big deltas that you imply, which would then beg the question, why are you applying it when you think the numbers suit your "stupendous" position? I also noticed that we're only talking yuppie neighborhoods. What specifically are you referring to in the attachment that you would qualify as stupendous? Also, are you a realtor?

[Condo]

Seriously John? Now you're critical of the positive adjectives that one uses? It's every "Boston Proper" neighborhood. What part of this simple report and neighborhood breakout do you not understand? The "fine print" is highlighted in bright yellow. Blatantly obvious. Are you challenging that this activity, sales absorption and totals are not positive? I am not a realtor ... and I'm willing to wager, your not involved, at any level, in the industry.

[john p]

Yes I do think it is important to use the right adjectives. "An up tick in high end sales in the more exclusive neighborhoods" is more accurate. The stock market fell tremendously today (400 points qualifies as "tremendous" because it hasn't happened since Sept. 12, 2001)

We are in fact living in two worlds, the rich and poor, money is flowing to the rich and your attachment shows this. (Significantly fewer transactions with higher absorption). I guess I am a bit of a utilitarian and I see a "good" market when an everyday joe-sixpack can buy a home. Until we settle back to that fundamental base, housing is risky. It is risky because if you have to sell you don't have an abundance of people that can buy your property, the buyers have the upper hand. When I see the number of transactions start to tick upward I will feel more confident to be positive.

Thank you for offering your basis, I'm still a bit confused as to what you're putting emphasis on, and I realize that the "fine print" was highlighted however, "stupendous" means you blew the doors off and the late breaking wildcard of a few larger unrecorded building sales wouldn't make the difference in my mind to skyrocket the numbers into the "stupendous" level. I see that you see a ray of light in the upper end markets, which I think makes sense based on how last year's economy went (rich got richer, working class's salary grew at about 3-5% and cost of living went up about 3-5%)

I think the driving factor for this year over year analysis is the interest rate. The interest rate was higher in December 2005 than December 2006. I use December because I'd guess that people came to terms in December for a sale in this period. I think that people that may have been on the fence and close to terms with a seller (within a percent or two) may have had the lower interest just enough weight to tip the scales. That type of elasticity to interest rate is just riding the bubbles man; it isn't "stupendous" material. Nobody ever said I ever did anything "stupendous" in my life so I am putting that term up on a pedestal....

Oh, wait, I did hear "stupendous" before. People told me that I got a "stupendous" deal recently in real estate. I remember prior to buying how important it was putting a lot of my future on the line and trying to find accurate information to arm me in the most important financial decision of my life. I found people that overstated things to either be manipulative or be cherry picking something specific to their needs. I am glad you added the graph so I can assign my own value to the activity. I don't want to underestimate your observation, so I'm wondering why the number of transactions doesn't concern you. I would not have bought if I didn't see rays of light in the horizon; I don't think we've spotted land yet. If you are right, and honestly, part of me is really calculating your point, wouldn't it be unusual that high end homes are dropping in value and high end condos are doing well. I think that NEW high end condos are a bit new for the Boston market. My other question for you is what is the typical profile of the buyers for these segments. Don't mind my questions, I need to assess if someone is on the level before I trust their input. This is a risky venture for young buyers and they have been manipulated and preyed upon so be just a little bit tolerant of the punchy bears.

I wonder if any of the financial people who bought overpriced condos in "Boston Proper" are feeling a "stupendous" amount of stress after the "stupendous" drop in the stock market.

[Harry]

[JCK]

[Condo]

Harry,
I respectfully disagree with your opinion that the only reason people want to live in a condominium is due to being priced out of a SFH. Many folks, about 80 million Americans fall in the following categories; young professionals, empty nesters, baby boomers ( those born between 1942-64) middle aged divorced singles and "snow birds" are out in great numbers, looking for the condo lifestyle. For differing reason, and many of the same. Ease of life, no maintenance, primary residence near family for retired folks ( second home in warmer client), covered parking, someone to call when you are in need (on site maintenance staff or perhaps concierge service), single floor living for older folks, stylish finishes in the home, in many instances amenities, no yard work, no snow / trash removal, down sizing, closer to the city for leisure activates or work, less commuting time to the city. The list goes on...... In many cases, they are saving money over time due to the condo fee's...with an alternative example of a SFH cost..... 15K for a new roof.
You are correct in identifying one demographic not fitting the above: Young couples, planning to have children, tend to sway towards the SFH and the suburban lifestyle for their children. I live in a condo.... I rather enjoy it as well, easy, garage parking, drop my laundry off down stairs, quite building, great area etc. It's certainly not for everyone..... but for more and more folks, it's the answer ...and an extremely desirable one.

JCK,
The Emerging Condo buyers and the Urban Condo buyers have different financial backgrounds, but similar demand drivers. They are not overlapping one another. Folks in the marketplace tend to know their price range based on the parameters they set for themselves, and search accordingly. A 2BR 1.5mill Battery Warf buyer, is not a 1BR Station Landing buyer in Medford.
As far as foreclosures are concerned, I believe Barnstable County has the highest rate in MA. It is not a coincidence that many of these homes are "Second Homes". If you could only pay the mortgage on one of your homes, primary or second, the second home would be the loser. I honestly believe that there has to be some amount of accountability placed on the home owners; sub prime or not. Particularly the folks that got themselves involved in IO Option ARM's. ( Clearly not for everyone) It's not as though these folks, and other with straight ARM's, did not know there was an extremely good chance their payments would go way up in the foreseeable future. I think the onus is placed squarely in the shoulders of the home buyers. Folks need to proceed with financial caution, as well as forthsight. Without seeing the town by town break down of foreclosure figures, I can only assume. I'll assume that the neighborhoods in urban Boston are not high on the list.

[Condo]

All,
The first five weeks data has been cross referenced with the registry and revised, upwards, as promised. Still not fully accurate...expect more increases across the board. Again, these are extremely positive figures.....
http://otisahearn.com/marketstudies/marketreport_2007_fiveweeks.pdf

[john p]

Can you give us more regarding the profiles of buyers or big projects that have made the most significant changes:

Up significantly:

East Cambridge- a big development perhaps?

Waterfront- big development, big dig finishing?

South End- empty nesters, quiet, safe area with good restaurants, snow birds?

Seaport- big development?

Down significantly:

Fenway- ?

South Boston-?

[Condo]

Some updated figures, downtown Boston condo sales Jan 1 - March 5th. 2007. As always, these numbers will be revised upwards once cross referenced with the Registry.
Transactions: 394 Absorption: $273,831,037.
The condo market continues to be very strong. Many folks anticipating a great spring market in Boston. The data suggests my comments over the last several months are indeed accurate.

[Harry]

[john p]

This stuff seems to be another comingling of data. It makes sense to me that certain segments of the housing market could actually be experiencing a lift. Last year this time, you found people comixing Massachusetts data with National Data. This year you see the comingling of different neighborhoods, different price segments etc. Certain segments of buyers feel optimistic about their future earnings or a neighborhood's potential so there may be a few hot spots here and there. Just as people are fleeing from Massachusetts, you do see New Yorkers seeing Boston as a haven. It's all a matter of perspective. Check out the property tax rate in Hoboken. Unbelievable.

Overall, I do see properties overpriced as if sellers are either oblivious or have just padded their prices. I do see some reasonably priced properties so it would be unfair to lowball in these instances.

Because the price strata is based on a changing income disposition you will see sinkholes and some properties will lift and others dip on a case by case. I'd keep my eye on the middle of the road properties and see which way they drift.

[Condo]

Mudd,
To suggest that I speak without thinking is nothing short of absurd. I base my comments on irrefutable statistic which are public record. I am certainly optimistic about the down town and emerging condominium market, because that's what the data suggests. My comments and predictions are not at all baseless, as I provide data to support my position.
As far as the sub prime market is concerned, I'm not going to say this is not an issue in some respects. But this has zero effect on the downtown market, or the emerging market new construction developments ( developers reserve the right to have clauses in the P&S outlining mortgage contingencies, an 80% mortgage contingency clause is not uncommon) ...the sub prime problems effect 2nd home locations and less desirable, less affluent areas. Period.

Personal experience, which just happens to parallel my position. .....

Friday afternoon I spent some time with a buddy and his broker /girlfriend looking at property in the South End. We took a look at some new construction properties and existing inventory. One particular property was on Appleton St. It was a 900+ sq foot 2BR ( More like a 1+), 1 bath, a little balcony, nice back bay view ( 2nd floor I think), 15 foot ceilings, fireplace, hardwood floors, including deeded parking. Not a ton of closet space ( certainly not like new construction, but sufficient), bathroom was OK, not terrible...but again, not like new construction, nice renovated kitchen, nice sized master bedroom. The unit had gone on the market on Wednesday, asking price 610K. My friend seem fairly impressed and made an offer this AM for $1500 over asking. I got a call a short time ago from him ...the sellers received 7 offers, and the accepted offer was 20K over asking. People are out there, they are educated, willing, able and motivated. Folks know a good property when they see it. Condo market in Boston is strong .....

[admin]

[Condo]

Admin,
I interpret these numbers as positive for a number of reasons. These statistics reflect a tremendous amount of activity in the Boston Condo market. My position has never been that the present day market is as strong as 2005 in categories across the board, however, certain aspects of the market are indeed as strong as 2005, such as the absorption figure. Some psychology has changed. Folks are not as willing to pay top dollar for inventory they do not view as desirable. This factor has emerged in recent years, as new construction and nicely renovated condos have presented themselves to the Boston marketplace in quantity. However, this inventory has been absorbed over the last few years. The new construction inventory has depleted due to tremendous sales volume. Educated buyers reject less desirable properties at higher price points ( even new construction if not up to par with competition. Example: Folio)

Obviously, as reflected in the numbers, price is rising, and I believe this trend will continue. This may be deemed negative by some of your subscribers, however... for sellers and developers...it's positive...and buyers are not trigger shy about paying these prices....as inventory is moving quickly. I should revise that, inventory is moving quickly if priced properly and sellers are managing their expectations appropriately. A perfect example can be found in my last entry as it pertains to the Appleton property in the South End. Nice property, priced appropriately. The market jumped all over it, the seller had multiple above asking offers and it moved in 4 days. Happy buyer, happy seller...game over.

What would I consider negative? Well, first off...... the numbers are extremely important, however, they are not on a an island of their own....there is much more to the story. If buyers were not out in great numbers viewing properties, making multiple offers, if developer open houses where slow, the absorption numbers were ...hypothetically 60% of what they are, if transactions where way down, hypothetically 100 sales...that would be a problem. This is simply not the case. Activity is not presented in the statistics and is equally important. Buyers are out in great numbers, sales offices are busy, many brokers are very busy ( at lest the quality brokers ...not the part time, hack, half involved brokers that always complain about being slow). Prices will continue to rise in the more desirable areas, for quality inventory, it's the nature of the game. I can remember in 1984 looking at a very nice 2BR condo on Beacon St on the Common with my Father, we walked in, he looked around, looked at me and said.... " Who the F would pay 175K for this place!" The market my have hiccups along the way, but it will always move upwards....unless of course there is some unforeseeable depression, in which we all will have more important things to worry about.

I do not have rent figures to share. I will say this, the investment model does not work well in Boston anymore, if one happens to have 50% to put down; rendering their cash flow positive: great, it works. Renters rent .... people in a position to buy, buy. If you can't afford to buy, you will rent, if you cant afford to buy in Downtown Boston, but want to buy ( willing and able) you will bump to the emerging market ...which is exactly what's happening. But, it's always been this way. I have been reading snippets on this site for months now about folks saying that the are renting for $500 /$1000 a month and want to buy, but can't find anything in their price range ...well guess what .... you could not buy in MN either....unfortunately, these folks are just not buyers. If prices are so high, and the renters cant afford to buy in Boston ...how are the high absorption and transaction numbers presenting themselves? I don't buy it.... to me they seem like to completely different worlds. When I was younger I rented, I got older, made more money and bought.... I'm typical of a lot of Bostonians, and a lot of people I know and talk with. I understand MA is expensive and Boston is expensive ...but it's a wonderful place to live. I have seen and worked in several month stints in other parts of the country that are much more affordable ....there's a reason Boston is expensive, it's an extremely desirable location to live in.

I do not have data to share with you demonstrating the demographics that I have discussed. Data is proprietary to each individual development, but I have seen the spread sheets... developers have registration lists and/or data bases of potential buyers who visit, where they are from, what their demo is, if they own or rent.....I'm talking hundreds if not thousands ( depending on how long a property has been open) per property. This is not a formula that I have the ability ( or desire) to break down into raw data...but it certainly demonstrates huge numbers of folks out looking. Glancing through the lists, there is no shortage of baby boomers identifying their purpose of looking as "down sizing" or "one level living" or " condo lifestyle"....most of them identify their primary residence as SFH's in affluent suburban towns outside of Boston.

Thanks for the heads up on the report language. I do not create the reports, but can pass the comments along.

[john p]

Regarding your statement: