Modestly priced condos grow rare

In the current red-hot condominium market, modestly priced units in downtown Boston are growing scarce.

Sales of condos priced under $500,000 are declining in the city's core neighborhoods but not because demand for these units has slowed. Sales fell because properties are appreciating so fast there are fewer available in that price range, according to a downtown market analysis by Boston real estate brokerage Otis & Ahearn.

In contrast, high-priced condos are sprouting like mushrooms and driving up sales in these neighborhoods, including Back Bay, Beacon Hill, the North End, South End and the area around Tremont Street, known in the real estate industry as Midtown.

''Unless you are a well-heeled, well-to-do person you're being pushed out of the downtown condo market," said Dan LaBarre, a South End and Back Bay broker with R.M. Bradley Residential. ''The inventory that seems to be moving briskly and is impervious to price increases is the super high end."

In the first six months of 2005, 1,008 condos sold for $500,000 or less, 34 percent fewer than the 1,348 sold in the first six months of 2004; it was the only price category that experienced lower sales, Otis & Ahearn said. In all price ranges above $500,000, a total of 827 units sold, a 17 percent increase over 707 sales in the first half of 2004.

While the under-$500,000 category remains the largest, it is shrinking and will continue to do so, predicted Kevin Ahearn, the president of Otis & Ahearn. The inventory available under $500,000 is shrinking because, as prices rise, it has become increasingly difficult to build and replace those lower-priced units due to rising land and construction costs. [The data are preliminary, the firm said, and final 2005 sales are expected to track 2004.]

''You can't produce units under a half-million," Ahearn said, unless it is ''an older vintage apartment done in the '80s or a conversion like Parris Landing," a rental property in the Charlestown Navy Yard. ''I don't see anything on the horizon that's going to slow down the appreciation."

Downtown condo prices rose at a 12.5 percent pace over the past year, a record, reported Listing Information Network, or Link, which also tracks the downtown market where most properties are condos. The median price was $472,500 at the end of June, up from $420,000 in June 2004, and $380,000 in June 2003. Statewide, the median condo price is $287,000.

''Properties have appreciated so much" downtown that ''there's just not a lot available under $500,000, and anything new coming on is usually starting at $800,000," said Debra Taylor Blair, Link's president.

But Jon Goode, who manages the South End offices for Coldwell Banker Residential Brokerage, said the under-$500,000 market is still viable. One of his offices sold 12 properties last week, of which eight were in that range. ''What you're hearing in the press is about the Hollywood units with 20 to 30 percent increases," he said. ''There really are some terrific, moderately acceptable increases happening in certain segments of the market."

In the South End, brokers said $550,000 might buy 1,000 square feet of space. While studios or one bedrooms priced at $500,000 are available, it is virtually impossible to find a two-bedroom.

Yet condo construction downtown in 2004 was roughly double 2003 levels, Blair said, generating a growing inventory of condos with top price tags in newly constructed or renovated buildings offering buyers luxuries such as doormen, top-of-the-line kitchens or sweeping views. The Mandarin Oriental Hotel Group recently formed a partnership with Boston developers Stephen Weiner and Julian Cohen and former Four Seasons general manager Robin Brown for a project that will include condos for up to $12 million. With prices going skyward, those who have owned a place downtown for a few years are able to trade up, LaBarre said. But first-time home buyers who start looking downtown often realize they can't afford it and are forced to migrate to more moderately priced areas like Hyde Park, Roslindale, Jamaica Plain, or Dorchester.

Kimberly Blanton can be reached at blanton@globe.com.