Boston’s condo market and the meltdown in Las Vegas

this is another in a long line of "feel good about the Boston market" articles. Basically like someone who weighs 500 pounds saying "at least I'm not as fat as my 600 pound sister". Of course Vegas is a disaster, almost any market looks good compared to there. The Boston market is still lousy and will continue to get worse. Getting local shills (realtors) to spout otherwise in the media, is merely whistling past the graveyard and yet another example of a media that fails to ask meaningful questions about the markets.

We won't see that here, in all seriousness. The LV market had overbuilding we just don't have in Boston (as did Miami et al).

Which is not to say we won't see price drops. Rather, we'll see prices drop to levels that reflect fundamentals. An income of $100,000 a year is good in Boston, and puts you in the top tranche of earners. That income lets you afford a 350k place, at a bit of a reach. Which in turn buys you almost nothing.

Compare how many people in Massachusetts make over 100k to how many houses and condos in Mass are valued over 350k. Its dramatically out of whack. That money has to come from somewhere, and used to come form the banks. But look at lending - banks simply won't fund those loans any more.

If incomes don't go up, prices will have to come down. There is simply no other choice.

“A fool and his money are soon parted.” - English Proverb

Sums it up nicely for people who chose to speculate on preconstruction phase condos at the height of the boom without financing contingencies.

I am not sure about the whole Boston market, but the little nitch that I am interested in (1 Bedroom, 450-500ft/sq, not a refirbed basement, in 0211x zip code) has totally vanished. Nothing is selling, because there is NOTHING on the market. If you don't believe me, just check the MLS.

Many homes with two professional wage earners and with money saved from other sources can afford the more expensive homes. There are alot of these families and they can afford to buy the expensive homes. There are also alot of nice homes in the greater Boston area that are priced below the median; just not in Newton and Lexington. The price of the more expensive suburbs will never reflect the incomes of the lower to middle wage earner and never has. Prices in the expensive suburban areas do not have to come (substantially) down because inventory of homes is low and there are now people out there shopping. The trouble with "fundamentals" is that in any urban area we really have numerous submarkets and they will not all come back at the same time in the same way.

While I am cautious optimistic about pockets of Boston real estate market (mainly metro west areas), downtown condos, esp luxury ones, are in very bad shape. Just way, way too much supply.

If you really want to bitch and moan about how bad the Boston market is, try looking into the Miami market. Prices are down 50-75% from the peek during the summer of 2006.
I use to live in Boston and moved to Miami for better winter weather in 2003. I'll tell you that's all Miami has going for it, the weather! There is nothing here like you have in the greater Boston area. The sports, the culture, the history, the civic pride! Boston is a great city. I really would love to be back. Sometimes you don't realize how good you have it until it's gone!

I've lived in Miami, and certainly would agree with just about anything negative said about it.. But there are plenty of places that are neither Boston nor Miami, and are nice.

Its possible to look at households with high incomes - as mentioned above. Surprisingly hard to find the data with specificity, but it appears the top 20% of households in Mass had a median income of 175k or so, so using the definition of median, 10% of Mass makes over 175k. 175k times 3.5 (max affordability) is 612.5k.

So only 10% of massachusetts families can afford a house over 612k. It would appear that a LOT more than 10% of Mass houses are over 600k. Despite the myth of people making lots of money here, the numbers just don't add up.

I'd love to see more data on percentage of houses over 600k if anyone can scare them up.

I receive listings from an agent for a 2 bedroom condo's in Back Bay, Beacon Hill, North End & Waterfront for a price range of $399K - $999K, there are 38 listings 612K. I realize these are higher priced neighborhoods but a roughly 30/70 split? Plus, how many of the top 10% income households are going to want to buy a 2bed, 700-1,000 sq. foot condo in the city? I'm sure people who have worked hard to achieve high income status would see that as a reward...

One more problem with these falling prices - the buildings are still 'luxury'. SO if the prices tumble to something affordable, it may not mean much of the HoA is still $2k/month to pay for all the luxuries... (never mind the fact that a half empty building still costs the same to run - who gets to make up the difference? :-)