Kathy,

Yes, just like almost any other service business in this economy, agents have to travel wider geographic are to stay in business (translation: more competition). This phenomenom is nation-wide, not just boston area or bost-proper. More than half of all agents will in all likelihood find a new profession or line of work. The number of agents more than doubled from the pre-bubble years; with the gold rush over, people will just have to return to their previously normal lives or find a new gold rush in some other fields.

What I wanna know is with the inventory so incredibly restricted in Boston Proper, and so many real estate agents, how does anyone selling homes make a living around here with (relatively) so few sales? If you've got only 236 units sitting around not selling very quickly, it's gotta be a really tough time for agents. No??

Those priced correctly are not staying on the market for long, whereas those priced outlandishly sit on the market and over-represented in listing average. That's why it's important to keep in mind that the listing average does not represent what houses are worth; but instead, the lowest price on the listings is just above the market clearing as it is not clearing through the market yet. It's like looking at level-II stock quotes, only looking at top half the offers, with no bids showing on the listing.

Yes, the million dollar asking-price too will eventually go down to $500k to clear the market. How many those million-dollar houses are collecting $10k/mo rental income? None is my guess. I went to an open house in one of the wealthiest suburbs over the weekend. Saw one house asking for $1.2mil; the owner bought the place for 950k in 2005; he must be hoping to get his negative-amortizing loan paid off. He is living in the au pair suite, with the main house rented out to two women. I doubt either tenant is paying over $1000 per month as few people would choose to have two roommates if the same rent can get a one-bedroom apartment or better. So what kind of million-dollar homeowner would pack himself into the tiny au-pair bedroom in order to generate measly $2k rent a month? A marginal holder who has debt way over his head is my guess. If I have to evaluate that property stricly on rental income (including the au pair suite itself) using historical metrics, it's not worth more than $3-400k! The $1.2mil asking price has no basis in reality.

You shouldn't ever consider the mean of house prices unless you've restricted the range pretty strictly. Actually, any time dollars are involved, the mean tends to be a bad notion of the center. Does the median show more or less gap?

Thanks for all the feedback, guys.

Bummer about those mis-entered MLS listings. I'll have to talk to Redfin about adding a feature to leave some entries out of the averaging calculations.

PS: just checked the data...my gut seemed on target as in the same 3 month period that Back Bay had 9 units in excess of 900K sold, the South End had 20 units and Beacon Hill 4 units.

Another great post Cosmo.

It's really not all that complicated: slightly over half of the 236 units for sale have prices in excess of 900K which skews the "average" number. In the most recent 3 month period, 20 units priced between 400-600K were sold and only 9 units in the same period in excess of 900K.

While "granite glamour" plays some role in overpricing, as John says above the time on market for some of the ambitiously priced listings (I refer to those in excess of $2M for example) is longer.

Last, this is just an empirical gut reaction here as a professional focusing on both markets, but the South End has vastly increased its share of the 900K+ market and most of those buyers come from what a market that would only consider Back Bay but now prefer the South End.

I wouldn't say bubble, but would argue there are two different markets. In the $200,000 - $600,000, there is a shortage of supply. Listings in this range will sell quickly (2 months?) if a buyer sees value in the square footage, design, or quality.

There sure does seem to be a lot of $1 million plus listings, and these are on the market for a lot longer, which skews the average days on market for the Back Bay.

The higher-end listings are sitting for three reasons: there's a lot of supply so buyers have a lot from which to choose, there are fewer buyers since people who are trading up can't or won't sell their homes in the 'burbs or lower priced condos in the city, and sellers are stubborn and are willing to wait out the market to get buyers at their prices. You can see what's happening - the sellers aren't getting their prices, so the properties sit!

To me, it's not a bubble that will burst - for those properties over $1 million, at what price would they be "affordable" to the typical buyer? At half a million? The million dollar listings are not going to come down by 50%. The market will just have to work through the excess, slowly, so the effect on average price will be slow.

It's similar to problems in Orlando and Las Vegas, I guess - unless the units were "free", there just isn't the demand.

We aren't quite in the same situation, of course. There are only 230 condos for sale in the Back Bay, surely there are buyers for most of those. Orlando has something like 10,000 coming down the pipeline.

It's the square footage. Back Bay's average listed footage is 2053 square feet to Beacon Hill's 1972. The average sale square footage for Back Bay is 1153, vs. 1724 for Beacon Hill. There's no bubble. It just happens that the 21 recent sales in Back Bay are smaller. The average $/square foot would show similar gaps between the two regions, except that one Back Bay home is listed at $5 million for 1 square foot, so the average is junk.