BOSTON–The 2019 Greater Boston condominium market stabilized from what has been a five-year run of price escalation, absorption and diminished supply, according to a report from the Collaborative Companies.
The report said that although the overall sales volume numbers decreased from 4,002 to 3,404 year over year, Boston not only witnessed the highest absolute prices ever recorded but the highest price per square foot numbers, with Pier 4 and One Dalton leading the charge.
“This dichotomy between decreased absorption and elevated pricing has required developers to consider an adjustment in their anticipated absorption timelines for performance estimates,” the report said. “We attribute this upward trend in pricing to the increased cost of development in Boston. This has encouraged developers to focus predominantly on high-end projects: those averaging well over $1,500 per square foot and with a minimum price of entry of over $1 million.”
The report said that the 2019 median unit cost was $810,000, but the current available inventory boasts a median price of over $1.1 million.
Here are some other findings from the report:
- Buyers have not been able to fully engage in this new, costlier market. Wage growth has not risen sufficiently to keep up with price escalation.
- The factors which would traditionally support a fast-absorbing pricing dynamic do not appear to be available for this current supply of product.
- In order to maintain a balanced and consistent absorption, they need to be designed with efficiency, broader unit diversity and a range of absolute dollar price points in mind.
- Projects that are well designed, positioned and offer a wide range of pricing are continuing to sell at a record pace.
- The current oversupply at the high-end of the market has resulted in a change from a seller’s market to one benefiting the consumer.
- Foreign buyers have not impacted Boston’s real estate market as much as other locations. Difficulty moving funds, coupled with their interest in units under $1 million has kept their involvement at bay.
“The prognosis for 2020 appears to be very similar to this past year. With many more units scheduled to come onto the market with price points in excess of $2 million, competition at the high end will continue to be fierce,” the report said. “Interest rates will be stable as the Fed balances inflation with the economic data during an election year. The highest successes will be for those developers who are strategic and creative, understand the depth of the consumer capabilities and are aggressive with opportunities. It’s a tale of two markets – highest price versus highest volume, and it’s unlikely both will succeed simultaneously.”