January 30, 2008
Are Beacon Hill and Back Bay Prices Heading Over the Falls?
Over the weekend, I was chatting with an acquaintance about the recent economic problems. I haven’t gotten the chance to run it past Econ Cat yet, but this guy seemed to think that home prices were destined to drop until they fell back in line with the GDP, which has lagged behind the increase in home values since WWII.
While this makes sense on a national scope, I countered that in a market as geographically compact and jammed with affluence as Boston, limited supply and a plenty of free capital would keep prices high. But with this most recent round of price reductions…might be time to invest in a cast-iron barrel.
35 Hancock Street, #1 - it’s a head-scratcher, folks. $40,000 off an already decent price. I mean, yeah, it’s half in the basement, and yeah, a bit far from the T (Bowdoin isn’t reliably open), and I’ll even admit that Hancock Street is pretty heavily traveled by Beacon Hill standards. But $579 a square foot? Prices like that in this neighborhood generally come with a free set of el tracks.
1 Charles Street S, #512 - I remember saying something about how those big seven figure places never cut prices. Well, consider me wrong to the tune of $80k. Of course, this high-gloss two-bed condo perched above the common doesn’t quite fit the same bill as those Beacon Street Brownstones, and probably owes a good chunk of its value to the status of the location. Might still want to wait on this one, as the price - even reduced - remains around 150% of its assessed value.
90 Chestnut Street - Now this is how you do it. Gotta sell a plush single family on the Flat of the Hill, mere footsteps from Charles Street, the Esplanade, the Common, and yes, even Cheers? Lopping a cool million off the sticker price ain’t a bad way to start. Yeah, it’s still 5.9 million, but with gorgeous skylights, detailed wooden trim, and a uniquely-styled exterior that manages both to match and stand out form the rest of the neighborhood - man. Even in a diving market, if I could buy something like that, you better believe I would.
photo: “Bobby Leach and his barrel after his perilous trip over Niagara Falls, Ontario”. July 25th, 1911. Public domain, Library and Archives Canada, via Wikimedia Commons.
The Buyer's Broker said:
It’s a good question. My experience has been that there is currently a huge demand for Beacon Hill real estate. The only caveat is that it has to be decent property and priced reasonably. Of the 22 Beacon Hill listings currently under-agreement, 7 (32%) were put under contract in less than 21 days. I think the price drops are more an indication of the number of poorly priced listings than they are of a falling Beacon Hill market.
January 30, 2008 11:29 AM
John said:
I doubt desire for Beacon Hill/Back Bay/Boston city center properties will ever _not_ be huge. We can assume that desire for such areas is essentially infinite. Who wouldn’t want a palatial Beacon Street manse? However, desire and demand are different. Demand = desire + ability to pay. And people can’t pay much now.
The market is shifting. Constraints on mortgage lending are tightening. People aren’t able to pay 2005/2006 prices anymore. Even in wealthy markets. I also think buyers are fed up with prices which we all kinda know deep down are completely outlandish.
January 30, 2008 12:57 PM
bikes2work said:
I’ve seen the 35 Hancock unit. It’s very nice. However there has always been a discount for basement units (or half basement in this case). This unit was purchased in late 2004 for $705k. Based on price drops I’ve seen in surrounding areas, and the fact that I’m currently renting a place in Beacon Hill that’s *almost* as nice for about 60% of PITI, what’s my incentive to buy? I just don’t see near-term appreciation. Maybe I’m wrong, we’ll see.
January 31, 2008 10:02 AM
cosmo.catalano said:
Broker, I agree that housing cost declines are more reflective of poor pricing than a market downturn, but a seven-figure price cuts should make anyone investing in the neighborhood just a little nervous.
John, while no one doubts that the market is currently shifting, there’s some debate on whether those shifts will have much effect on high-end markets. I’m hoping sanity prevails and prices de-inflate, but there’s still a lot of money looking to live in this part of town.
bikes2work, as a renter myself, I can relate: lower costs, less risk, more flexibility. But there times (usually right after I mail my rent check) when building equity, even at an inflated price, seems pretty freakin’ alluring.
January 31, 2008 10:21 AM