Condo Prices Still Lag in Housing Rebound

As in the rest of Massachusetts, sales have picked up in Boston for homes and condominiums, though not always with a rise in prices.

According to figures from The Warren Group, sales of single-family homes in Massachusetts have increased through June of this year over the same period in 2009 by 28 percent. The increase for the second quarter was 35 percent.

The increase for condo sales in the first six months of 2010 was 30%, with an increase for the second quarter at more than fifty percent.

The brisk sales match levels that haven’t been seen since the boom years of 2005 and 2006, but the median prices are another matter. For single-family homes, the increase in June and for the first six months of 2010 was around 7 percent. For condos, the increase over the first six months was 5.7%, but the climb in the second quarter and in the month of June was lower, at less than 2 percent.

The Warren Group’s figures from Boston neighborhoods show a general flattening in prices later in the year, especially for condos, and even when sales were more numerous.

Among the areas with an above average increase in condo sales through June of 2010 were Brighton, Charlestown, South Boston, Jamaica Plain, and Mattapan. The largest increase in median price for these sales over the first six months was in Brighton, at more than 13 percent. In other areas, the median prices are down: in Charlestown by almost 2% and in South Boston by slightly more than 1½ percent.

In Jamaica Plain the increase in condo sales through June of this year was more than 39%, but the median price during that time was down by more than 7 percent. In June the drop was almost 8.7 percent.

The co-owner of the Jamaica Plain agency, McCormack & Scanlan, Karen McCormack, says one reason for a softening of condo prices was the ample supply of two-bedroom units.

“Because buyers had more choices,” she said, “there was this idea that buyers didn’t have to pay the asking price.”

But McCormack also reports more buyers from outer suburbs, attracted by Jamaica Plain’s combination of greenspace and proximity to downtown Boston.

“I’m definitely seeing again a resurgence of buyers from the suburbs, whose kids have grown up, and they’re selling their houses,” she said.

There was a different trend in areas close to downtown Boston, where the median price for condos increased over the first six months of 2010 by 12 percent. Sales volume was up, but only by 25% for the whole period, and less than 19% for the month of June.

There was also a contrast with last year in areas more severely affected by foreclosures and distressed sales. The increase in condo sales in Dorchester through June was below the statewide average, but the increase in median price was almost 28 percent. That compares with last year’s double-digit fall-off, when many units in multi-family houses were being scooped up in distressed sales for well below $100,000.

Also showing higher median prices for condos through June of this year, along with more sales, were Roxbury and part of the South End, Mattapan, and Hyde Park. With 118 transactions, the increase in median price for Roxbury and part of the South End was more than 22 percent. Though the number of condo sales through June in East Boston was down by almost 12 percent, the median price was up by almost 16 percent.

West Roxbury had what may have been the strongest contrast between the markets for condos and single-family homes.

For condos, the median price through June of this year was down by more than 20 percent, despite an increase in sales at 15 percent.

According to Joe Donnelly, an agent with West Roxbury’s Donahue-Brennan Real Estate, many of the condos are in brick apartment buildings dating from the 1960’s and 1970’s that were converted in the 1980’s.

“They went up the hottest and the hardest,” he said, “and they fell the most.”

But Donnelly says West Roxbury’s single-family market has lost less than ten percent of its value since the peak of the housing boom in 2005. Through June of this year, the market was close to the statewide average, with sales up by more than thirty percent and the median price a little better than average, increasing by almost 9 percent.

In other parts of Boston with more than twenty sales of single-family houses, there were double-digit increases in the median price through June in Hyde Park and Mattapan, with figures up in South Boston and Charlestown by about 32 percent.

Real estate agents readily acknowledge the sales volume has been given a boost by federal tax credits that were mostly for first-time home-buyers.

“The tax credit has served its purpose and has served as a stimulus to the market,” says The Warren Group CEO Timothy Warren, Jr. “Now, it’s time to withdraw that taxpayer support and let the chips fall as they may, and really see what the market will reach as a natural equilibrium.”

Warren credits two other factors with encouraging buyers: low interest rates, and the improving economy. So far, the recovery has been stronger than average in Massachusetts, but the state is not immune to more recent signs that the recovery is slowing down.

More Warming in Boston Housing Market

Figures from the Warren Group show areas near downtown Boston accounting for much of the upswing in the city's housing market, at least in condos.

The latest figures are for the month of February, and the comparisons are with Febraury of 2009.

Among the highlights in areas with more than a handful of transactions:

Areas near downtown Boston. Condo sales increased in February by more than 22 percent, and they're up so far this year by 26 percent. The median price was up in February by 31percent, and it's up so far this year by almost 29 percent.

Roxbury and the part of the South End. The median price for February was up by almost 54%, and it's up this year by almost 59 percent. But sales are down, with a smaller drop in February.

Sales of condos in Dorchester were down by 34 percent, but the median price was up by thirty-four percent. Last year many of the condo transactions in Dorchester were distressed sales, which helps explain how the increase over the year before was from $110,000 to $143,000.

Sales were up by more than 40 percent in Jamaica Plain, but the median price was down by almost 19 percent. In Charlestown, condo sales for February quadrupled (from only 4 in 2009), with the number of sales for this year almost tripled. There was little change in the median price this year for condos in South Boston, but sales were up in February by almost 26 percent, and for the first two months of 2010 by more than 37 percent.

The Warren Group also reports single-family home sales increasing in areas such as Dorchester, West Roxbury, and Roslindale. In Hyde Park, single-family home sales increased by 20 percent, with the median price going up in February by almost 38 percent. In West Roxbury, the median price for February was up by more than 12 percent.

Downtown Leads Housing Rebound

If there’s a recovery in Boston’s housing market, it’s less apparent with condos than single-family homes, and strongest for both categories near downtown.

Figures from the Warren Group show Boston single-family home sales increased slightly in 2009, with a very strong finish for the month of December. For the whole year, sales were up by less than two percent, and the median price was down by 2.24 percent. With many buyers racing to meet the deadline (since extended) for tax credits, sales for the last month increased over December of 2008 by almost 48%, while the median price increased by 24 percent.

Among the areas with more than a handful of single-family transactions, the most dramatic improvement for 2009 was around downtown Boston. In these parts of the city, sales were up slightly, but the median price increased by 36 percent. There was also a surge in Dorchester, but only for December, with single-family home sales up by 45% and the median price up by 25 percent.

Also showing a gain for the whole year was West Roxbury, where sales of single-family homes decreased slightly in 2009, while the median price increased by almost 6 percent. The largest decreases in the median price for a single-family home were in Roxbury (almost 33%), East Boston (more than 16%), Brighton (almost 15%), Hyde Park (just over 11%) and South Boston (almost 11%).

Dorchester has been hit hard by the rash of foreclosures over the past few years, especially in the condo market. In 2009, the number of condo sales in Dorchester was slightly down from 2008, but the median price fell by almost 50 percent.

For all of Boston in 2009, condo sales decreased by almost 10% and the median price decreased by almost 9 percent. In the month of December, sales increased over the same month in 2008 by almost 21%, while the median price was up by more than 15 percent.

The strongest finish for condos last year was in areas near downtown Boston. In this part of the city, condo sales for December were up by more than 43%, while the median price was up by slightly more than 12 percent. For the whole year, sales were down by almost 21% and the median price was down by more than 6 percent.

In some other parts of Boston condo sales for December increased without any gain in the median price. These areas included Charlestown, Roslindale and Jamaica Plain. For all of 2009, Roslindale condo sales increased by more than 42%, though the median price was off by almost 6 percent.

Housing Market Stirs Demand, Hits Snags

Note: this article appears in the Jul2, 2009 issue of the Dorchester Reporter.

Crosscurrents in Dorchester’s real estate market are pulling in different directions—extending the fall-off in prices of the past two years, but also showing signs of new vitality.

“If someone’s telling you there’s no business, they’re not in our neighborhood,” says the Dorchester office manager for Jack Conway & Co., Julie Simmons.

“There is a lot of activity now,” she says. “That $8,000 tax credit is really bringing people in.”

But even agents who vouch for people willing to buy and sell say their customers still meet obstacles.

“Definitely the buyers are there. They’re eager to buy because the prices are low,” says Patrick Dorcena, an agent who does business in Dorchester for Torrez Realty in Brockton. “What’s killing us are the banks.”

Working in favor of a turn-around in the market is the federal tax credit created primarily for first-time home-buyers. But tighter lending standards, especially for condos, have been holding off buyers who fail to qualify for government programs. And Dorcena says some lenders have been challenging sales prices with their own appraisals, or pulling out of deals at the last minute, slowing down sales by as much as six months.

According to figures collected by the Warren Group, the spring market in Dorchester hardly appears robust. Sales of single-family homes through the end of May are down from last year’s total by almost 20%, though the median price is slightly higher.

Condo sales in Dorchester are much more numerous, and they exceed last year’s total through May by more than 6 percent. But, over the same period, the median price for those units is down by almost 60 percent.

The owner of Just In Boston Properties, Justin Green, says the aggregate price for condos is “totally askew” because of the numerous distressed sales, often after foreclosures.

Many condo units in distressed sales have been selling for less than $100,000, and some for less than $50,000. But, in less than 2½ years, prices for one unit in a three-family house on Bellflower Street, just a few blocks from Andrew Square, have swung sharply both ways. In January, 2007, unit 3 sold for $360,000. All three units would later be foreclosed. After unit 3 was sold last November for $121,500, it was sold again in May of this year for $299,000.

According to Green, the streets between Edward Everett Square and Andrew Square are one housing market that could be poised for an upturn. And he says the same potential exists in other parts of Dorchester close to the Red Line.

“It stands to reason,” he said, “that something along a train line, a train line that’s been renovated, is a location that’s going to be in demand.”

And, just a few blocks from JFK/UMass. Station, a loft unit at 950 Dorchester Avenue sold in May for $410,000.

Between the extremes are unit sales with a less dramatic fall-off in price. One is a three-decker unit on Sawyer Avenue, on Jones Hill. It sold last month for $250,000, after having been on the market last summer for $279,000. The seller bought the unit almost five years ago for $309,000.

Though the tax credit for first-time homebuyers is scheduled to expire later this year, Green says the condo market in Dorchester could be in for some relief from new rules being introduced by the Federal Housing Administration (FHA). Starting October 1, the FHA will insure some mortgages for condos in buildings up to 4 units. That would make financing available with down payments of 3.5 percent. With conventional loans, the current down payment required on many condo units for buyers without serious credit problems can run as high as 20 percent.

Like Simmons, Green says there has been more activity recently, and he describes the spring housing market in Dorchester as “very strong,” with “a lot of sales.”

“We’re very busy here,” he said. “Not only is everybody working, but putting deals together and getting financing.”

But Simmons points to signs that recovery is still a way off.

“People aren’t moving as often as we would like in this business,” she said.

And the backlog on sales has an effect on rentals.

“A lot of rentals are sitting on the market there, and a lot of condos are being rented,” said Simmons.

“So regular condos,” she explained, “have to compete against the granite and stainless steel.”

Simmons says that makes for more of a renter’s market. But other agents say rents in Dorchester are holding steady, with prices mostly in the range of $1,100 to $1,300 a month. And Green says his agency sees more customers looking for apartments.

“The price of renting hasn’t increased too much,” he said, “but the demand has definitely increased.”

The senior organizer for City Life/Vida Urbana, Steve Meacham, says there have been “significant rent increases,” even in neighborhoods that bore the brunt of mortgage foreclosures.

“Banks were holding so much property off the market in low and moderate income neighborhoods in Boston,” he said, “that it was pushing up the rental market.”

Also seeing little relief for renters was the director of media and public relations for the city’s Department of Neighborhood Development, Lucy Warsh.

“We still have a major need for affordable units in most of the affordable neighborhoods, such as Dorchester and Roxbury,” she said.

In parts of Dorchester with more multi-family housing and a higher concentration of foreclosures, unit sales are often to investors buying in bulk. The city has turned over some foreclosed units in three-deckers, but with an eye toward having them redeveloped as rental property, preferably with an owner-occupant in one unit.

According to the city’s Department of Neighborhood Development, more than one-third of Boston’s mortgage foreclosures in 2008 were in Dorchester, and more than half of those were in condominiums--many created in three-deckers.

“We’re seeing that it’s not the best model for the three-deckers, unless you have a more affluent group,” said the director of the city’s Department of Neighborhood Development, Evelyn Friedman.

“One of the big challenges of a small condo association,” she argued, “is that if you have one person stop paying the condo fees, the whole association falls apart.”

The treasurer for the Dorchester Home and Garden Trust, Patrick Cooke, predicts recovery will be significantly slower in areas with the most foreclosures. And he says the foreclosures and the economic downturn are also cooling off the rental market.

“I don’t think it’s going to drop precipitously,” he said, “but it’s into a long, slow decline, and landlords are going to have to adjust their expectations.”

Cooke has been renovating houses in Dorchester for thirty years, and he has seen earlier downturns in the 1980’s and 1990’s.

“The downward pressure on the market is going to continue to be felt for some time,” he predicts.

In Dorchester’s multi-family housing, Cooke likens the latest downturn to a “can of worms,” confronting potential buyers with the expense of aging properties and the hurdles left by collapsing or non-functioning condo associations.

“The market,” he said, “almost has to get worse in order for these things to be salvaged.”