Boston Real Estate: Not Clinically Depressed, Just a Split Personality

Chris Glew – Redfin Advantage essayist and Boston hockey fan – stopped another fur-flying meeting in its tracks last week with an arresting observation. He said that even in this slow real estate market, he could tell just by looking when a new listing was going to sell in a couple of days. “I see it all the time,” he said, to a now-quiet room.

Whereupon further fur flew. Someone said that the only common characteristic would be a fire-sale price. Others talked about school districts, sex offenders, safe neighborhoods. And then someone quoted the founder of modern surgery, a corpse-stealing pragmatist who challenged the French mania for grand medical theories: “why think when you can experiment?”Boston

Why indeed!

So the Real Estate Scientist leapt into his white lab coat and began sorting through 9,212 real estate records: single-family listings in Suffolk County, Massachusetts that were sold between October 1, 2007 and March 31, 2008.

Why the Boston real estate market? Because our ex-hippie, oils-painting, die-for-the-customer, hired-all-his-cousins market manager – Alex Coon – laid it on the line, betting that such listings exist, even in the dead of the miserable Boston winter, and that most of them would be in Newton. He was right!

Here’s a rundown of the towns with the most listings that sold within seven days on the market; the numbers in parentheses calculate the hot properties as a percentage of the total houses that sold in those areas:

But it’s not just the location of the listings. Even in these markets, the average days on market was 85 days. The average for the entire Boston area was 105. This suggests that at least one reason hot properties were hot was the property itself.

So for the areas where there were a significant number of hot properties, we compared the listings that sold in less than seven days with everything else in those areas. Our goal was to develop a clear portrait of the hot property, so our buyers would know when they really had to hop to it. And here’s what we found:

  • Beds and baths were the same for both types: There was no pattern in terms of bedrooms and bathrooms. Hot properties and pariguayos party-watchers (aka slow-to-sell properties) both had 3 bedrooms and 2 bathrooms.
  • Hot properties are bigger: The median square footage for hot properties was 7% larger than the pariguayos. The median lot size was more than 13% larger. Maybe that seems obvious to you – bigger is often better – but when we began the analysis, we had imagined hot properties as cute little cottages.
  • Hot properties are older: The median year built (1949) for hot properties was 29% earlier than for the pariguayos.
  • Hot properties are expensive: It turns out that hot properties weren’t exactly priced to move. In fact, the median list price of hot properties ($459,000) was 78% higher than the pariguayos. And the high price isn’t just because the houses are bigger: the median dollars per square foot was nearly 40% higher for hot properties ($275) as compared to pariguayos.

The bottom line is that hot properties are bigger, older, and more expensive. That there are distinct areas and house types where properties still sell fast supports Chris’s notion that the real estate market isn’t really clinically depressed; it’s more of a split personality, with the good stuff selling fast, and the rest languishing.

You could take that theory a step further, and say one reason the market is bad is because the inventory is low-quality, first because some of the least appealing properties are being forced onto the market by foreclosure and second because lots of unappealing inventory is hanging out from the year before when the rate of new listings was higher. We’ll have to test that theory out on another day.

Bostonians, what do you think of these findings? Real estate watchers, what other markets would you like to see us analyze? Many thanks to Redfin’s Rick West for doing all the hard analytical work.

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