Downtown condo prices fall for 2d quarter
Median is 11 percent off its peak; sales fell almost 20 percent
Condominium prices in downtown Boston declined 6.9 percent in the three months ending Sept. 30, the second consecutive quarter in which slumping sales drove prices down in the once-hot downtown market.
The median condominium price was $419,000, down from $449,950 in the third quarter of 2005, according to the quarterly report issued yesterday by Listing Information Network, or Link. The median price was nearly 11 percent below the condo market's price peak of $470,000, which occurred in the fourth quarter of 2005. The number of condos sold fell 19.7 percent.
"It's a correction," said Larissa Duzhansky, a New England economist for Global Insight, an economics consulting firm in Lexington. She predicted prices will continue to fall well into next year but rebound in 2008.
Prices declined in 8 of the 12 central city neighborhoods tracked by Link, ranging from Back Bay's 4.2 percent drop and Beacon Hill's 1.9 percent drop to a 2.5 percent rise in South Boston and a 3.1 percent rise in the emerging Fenway neighborhood. Quarterly data on a neighborhood can an unreliable indicator of trends because the number of sales in a neighborhood in a single quarter are small.
The market correction comes as developers continue to plan and build condo projects in Boston, one of the most expensive US housing markets. Economists and real estate agents do not expect prices to go into a steep slide downtown, where a residential renaissance is underway. One reason is that the supply of condos remains modest. In the third quarter, there were 1,554 condos on the market -- less than five months' supply .
"What's remarkable is, yes, sales are off," but price declines are "marginal," said Debra Taylor Blair, president of Listing Information Network. "We're not looking at 20 percent price declines," she said.
The downtown market is "taking a pause," said South End agent John Neale of Sprogis and Neale Real Estate. "If everybody pauses, it slows the market down."
Neale said he remains "bullish" on downtown real estate. In today's soft market, properties in high-traffic areas of the South End such as Massachusetts Avenue are tougher sales than brownstones on cobbled side streets.
Duzhansky predicted prices will not rebound until 2008 because housing has become increasingly unaffordable.
In Boston last year, personal incomes increased at a 4.7 percent average annual rate, failing to keep pace with a 9.5 percent housing price increase.
"Even if they're dropping," she said, "they're still high."
Kimberly Blanton can be reached at blanton@globe.com. 
