bostonbubble.com

john p · Joined: 10 Mar 2006 Posts: 1820

I read a report that says that in Massachusetts, the median house price was $290k and the median condo price was $257,100.

http://www.boston.com/business/ticker/2007/11/mass_housing_pr_2.html

My first thoughts are:

Condos speak towards location (closer to jobs and urban life).

Does this indicate that the higher salaries are closer to the cities for current buyers? If so, what is the median salary in these different concentric rings growing outward from Boston? Do you have more dual income families closer to the City?

Why wouldn't someone want to live in a house than a condo? If the difference is $33k, isn't it a no brainer to get the house?

Are there any skews to these numbers due to volume at certain price points?

With respect to new supply, isn't it true that there hasn't been a true "starter home" built within the 128 belt in the past two decades? We do have a supply of "starter homes" within the 128 belt, but they were built for the GI's after WWII. Wasn't the new supply of single familes in the past two decades more focused on the growing family or higher end segments?

Are these old GI starter homes freeing up in the suburbs due to retiring or relocations?

Are people migrating out, and if so where?

Aren't "affordable" housing stock mostly in the form of a condominium or multi-family in the past two decades?

admin

john p · Joined: 10 Mar 2006 Posts: 1820

I agree. This data has attributes, which is why it has to be mapped out. Values also have attributes. A MacDonald's hamburger is a good deal if it is about a buck. If you charged too much you'd hear more scrutiny about the quality etc. Younger buyers are feeling that they're asked to pay the price of steak to get a corn dog. I personally never got the City. For my generation, I remember going to absolutely crowded clubs that were painted black warehouses and being asked to pay crazy amounts for parking, drinks, cover charges, etc. We were treated like cattle and asked to just line the club owners pockets. We did mostly so that we could meet girls, period. I think this desensitization (if that is a word) is what conditioned people to getting ripped off and deal with a crappy environment.

I think another underlying problem to first time buyer home ownership is that lots of properties need work, and if you don't have cash reserves, you can't absorb the risk that something significant will need to be fixed.

Things being the way they are, I think that I'd opt for a house and make sure I had a good home inspection to assess the risks and have some funds available to cover any unforseeables.

Lastly, another fundamental problem is something that you mentioned before: lots of non natives come here for school and want to get some work experience and city life in before they move back to where they grew up. Along with these folks, you have many, many suburban kids that want to life a chapter of their life in the city and don't want to pour sweat equity in a place; it is their time to work hard in the office, and play at night. If people have a short termed view towards a place, that's better aligned with a condo.

I'm just saying, ten years ago the difference between a house and a condo was much much greater. I was always baffled to see people pay $500k for a crappy condo in Boston when they could get a really, really nice house in a pretty quiet neighborhood.

admin · Posted: Thu Nov 29, 2007 4:24 am GMT Post subject:

JCK · Joined: 15 Feb 2007 Posts: 559

john p · Joined: 10 Mar 2006 Posts: 1820

You're totally right. I think it is good to bring out these points because people often look at historical trends and fail to footnote unprecedented changes, events, shifts in the market etc. Elevating your understanding for each area helps with the overall evaluation.

Take the minivan. If you were to tell someone that people were paying $30k for a van they would think you would be kidding 20 years ago. Now, minivans have t.v.'s E-Z Boy captain chairs, all the bells. Same with condos. Before they served the lower half of the market and now they think they are suited for the medium to high end.

What I think needs to be addressed now is that people are now shelling out of their categorical mindsets and are comparing and contrasting categories and not sub variations within categories. Meaning, imagine a menu at a restaurant. Imagine a different chef for chicken, beef, pasta etc. If the chef for the chicken starts to charge more than the chef for the beef, the customer will start to select beef (unless it tastes like crap). I'm saying that the price of chicken (condos) is coming close to the price of beef (house). I think that even people who have invested a year or two finding the best condos, neighborhoods, etc. will become aware of the fact that the beef tastes better and is a better deal.

Kudos to the guys who sell condos for being able to put lipstick on a lot of the pigs out there (I admit there are some amazing condos in amazing neighborhoods worth it if you're rich), but I do think it is wise to look at all your available options right now.

BK-former Owner · Guest

Condo prices in Boston were lifted by the same flood of Money that has lifted condo prices in New York, Philadelphia, or Chicago. Add in Baby Boomers who are trading-in the home where they raised kids for an urban Condo, increased in affluent single women and men, and you have a perfect recipe for rising condo prices.

This is not just a Boston or USA phenomena. The flood of easy credit world wide and demographics as been the perfect storm for driving up Condo prices.

john p · Joined: 10 Mar 2006 Posts: 1820

Do you think that the current prices of condos RELATIVE to current prices of houses is balanced today?

In architecture we look at the shell of a building like an envelope; kind of like a ski outfit. You will get cold if there are open areas where the heat can escape. If the pressure and demand on condos gets too much, people will look for alternatives. If the alternatives surrounding condos start to increase in their value relative to condos, I think you'll see prices drop for condos because more people will see the better value in houses and buy a house instead. As far as an envelope is concerned, this would be like watching a skiier take off their hat and watching the steam shoot right off the skiiers head. This envelope concept is related to NAFTA and China...

JCK · Joined: 15 Feb 2007 Posts: 559

john p · Joined: 10 Mar 2006 Posts: 1820

Awesome graph on your link showing the widening gap between single family and multifamily homes going up faster than condos up to the year 2005.

If you had to guess today 2007, is that gap still there or are the prices coming closer together?

I understand that my viewpoint is just my viewpoint, and I have total respect for all of the regular poster's viewpoints, so you folks are a big source of my outlook in many instances.

JCK · Joined: 15 Feb 2007 Posts: 559

I have no idea, to be honest. I think condo prices in Cambridge are level to less than 5% down vs. 2005. I haven't looked that closely at the SFH market...

Also, note that the condo vs. SFH prices are a tiny bit further apart than the $33k statewide average...

john p · Joined: 10 Mar 2006 Posts: 1820

http://www.boston.com/realestate/news/articles/2007/11/28/mass_map/

Wow, look at the geometry of the price movements. Even within the counties you'll see another layer of organization. Remember not too long ago they did a breakdown of the South Shore and some towns had gone up 10 percent while neighboring towns went down...

TrumpofDoom · Guest

I bet that there are very few condos in western mass. Where single family homes are cheap and there's lots of land why buy a condo at all? Condos are a way of accomodating high population density, and densely populated areas are much more expensive.

My guess is if you compared median condo prices to median single family home prices within a county the gap would be larger.

Speaking of condos, whatever happened to Condo?