Real estate slump hits luxury condos

Downtown sales, prices tumble

By Jenifer B. McKim
Globe Staff / April 24, 2009
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Boston's luxury real estate market is finally feeling the pain of the housing downturn.

Until recently, sales of luxury condominiums were holding steady - boosted in part by sales at high-end properties like the new Mandarin Oriental - while the city's general housing market lagged behind. But now the luxury market is faring worse than the rest of the Boston condo market.

The median selling price of luxury condos plunged 19 percent to $560,000, while sales skidded nearly 42 percent in the first quarter of this year when compared with the same period in 2008, according to data released today by the Listing Information Network, or LINK, a company that tracks the downtown Boston condo market. Sales in the city's overall condo market fell about 33 percent, and the median sales price, or midpoint price, dropped almost 14 percent to $410,000.

"This has been one of the most dramatic declines that we've seen within one quarter," said LINK president Debra Taylor Blair. "A lot of those buyers tend to be hedge fund managers, people directly tied to Wall Street. People maybe who were expecting a bonus that didn't happen."

LINK tracks about 72 full-service luxury condo buildings, which are defined as full-service properties with draws such as concierge service.

The data reflect the dismal economy in the second half of 2008, since sales usually lag several months behind when buyers and sellers agree on a price, Taylor Blair said. The unstable job market and higher costs of jumbo mortgages - which have higher interest rates that kick in at $523,750 in the Boston area - are also likely to blame.

"The numbers on the high end came to a screeching stop after the financial crisis hit," said Kevin Ahearn, president of Otis & Ahearn, a residential brokerage and marketing company that specializes in Boston luxury real estate.

To be sure, the entire Boston condo market this quarter dropped precipitously. The median price per square foot fell to $485 - the lowest price in five years - according to LINK, which covers 12 Boston neighborhoods including the Back Bay, Beacon Hill, and the Fenway. Sales volume and median prices also had the biggest recorded drops in nearly a decade.

But the fall in prices in the luxury market this quarter was accentuated because 2008 was a record sales year for luxury properties, Ahearn said. Top-dollar prices in buildings such as the Residences at the Ritz-Carlton, the Belvedere at the Prudential Center, and the Mandarin Oriental, pushed prices up last year.

The creme de la creme - or the highest end of the luxury market - still is holding pretty well, some real estate agents say. The top quality units in the luxury market have held their values the most, said Geoffrey Gibbons, sales and leasing associate for First Boston Realty.

"The best quality - meaning the highest floors, the best views, the most services and amenities - is holding up relatively well," he said. "There's still a good amount of people out there who are willing to pay for quality."

Curtis Kemeny, president of developer Boston Residential Group, agrees, saying that buyer traffic has actually increased through the spring at 285 Columbus Lofts in the Back Bay, which opened in June 2008. He said his company has sold five of its last units for an average of $1 million this year. Only two units out of 63 remain. Buyers received a small discount - less than 5 percent - this year, he said.

"In April, traffic has been heavy," he said.

Indeed, real estate agents say with the warming weather buyers are starting to come back, drawn by lower interest rates and what they perceive are good deals. They say they've seen an increase in open house attendance and sales agreements, especially among first-time buyers taking advantage of low interest rates and an $8,000 first-time home buyers tax credit.

"The big thing we are seeing is that prices are lowering, sellers are becoming more negotiable, and rates are lower," said John Ranco, director of sales at Gibson Sotheby's International Realty in Boston. "Buyers are out there and they are looking for values."

Overall, the downtown market is similar to the statewide condo market, said Timothy Warren, chief executive of Warren Group, which tracks real estate data in Massachusetts.

Statewide, condo sales last year dropped 23 percent but prices only fell about 2 percent, he said. In February, the company's most recent monthly data, statewide condo sales were down 30 percent and median prices fell 14 percent from the same month a year ago. This brought the median price of a condo in Massachusetts, at $220,000, close to the $245,000 median price to purchase a single-family home.

David Stenberg, vice president at Hammond Residential Real Estate in Boston, pointed out that home values in Massachusetts have not fallen nearly as far as other states. Home values in Massachusetts fell about 15 percent since the housing peak in 2005, compared with a 26 percent drop nationwide, according to the S&P/Case-Shiller home price index.

"If you compare us to what is happening across the country, we are in good shape," Stenberg said. "We would all like to see more buyers."

Jenifer McKim can be reached at

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