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Downtown condo sales may be down, but prices are not, Boston’s luxury market guru contends

Posted by Scott Van Voorhis  September 15, 2009 09:00 AM

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The downtown condo market has become a popular target lately.

I’ve taken a few shots myself and there’s no lack of ammunition out there if you are so inclined.

Sales at an array of new, downtown condo projects have fallen to a rather sluggish rate of one per month, according to the recently released PrimeTime Urban Report.

But not so fast, argues Kevin Ahearn, the dean of the downtown condo market whose sales team has can be found behind just about every major new luxury project.

If you are interested in a statistical duel, Kevin’s your man, because he will bury you in a blizzard of stats and numbers.

Anyway, not long after I weighed in on the troubles facing the downtown condo market in this blog and a column for Banker & Tradesman, Ahearn was firing back.

As usual, he provides some great stats to back the view that all the handwringers out there like me just aren’t seeing the true picture.

“I guess I’m living in another Boston,’’ Ahearn writes.

Ahearn acknowledges sales slowed in the fallout from the Great Recession, but notes there are signs that activity has been picking up in the downtown market.

That’s plausible, with PrimeTime’s report only covering the first half of the year.

But prices have more than held firm, contends Ahearn, who offers some intriguing stats to back up his argument.

Ahearn examined four years of resales in the top end of the downtown condo market, looking at 134 transactions from 2005 to 2009. His survey included the top properties, including the One Charles, the Ritz-Carlton towers and the InterContinental.

Just under 12 percent of these condo sellers were stuck with a loss, and of these only five lost 10 percent or more on their resale.

By contrast, more than 84 percent resold their luxury units for a gain.

That does not address first-time sales of units in new projects.

But it should certainly spur a lively debate, don’t you think?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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13 comments so far...
  1. For starters, that's 4.5 years of sales, and fully 2 or 3 of those years we were basically at the height of the bubble. What percentage of those sales occured during that time? Half? Three quarters? I think Mr. Ahearn is living in another Boston and his analysis is skewed at best and deliberately misleading at worst. Just a layman's quick reading...

    Posted by reduce media September 15, 09 09:48 AM
  1. The market has changed quite a bit in the last year. Four years of re-sales? Did he break it down year-by-year? Is it possible that the data is skewed by sales numbers from '05 and '06?

    Posted by megan September 15, 09 10:06 AM
  1. Ahearn examined four years of resales in the top end of the downtown condo market, looking at 134 transactions from 2005 to 2009. His survey included the top properties, including the One Charles, the Ritz-Carlton towers and the InterContinental.

    This study is obviously flawed. People who sold from 2005 to mid-2008 sold at or near the peak-- of course most of them made money. Furthermore, the transactions are likely skewed toward earlier years because volume was much higher then (Note: I have not seen the data so this is speculation on my part). I'd also like to know the average holding period...

    Kevin Ahearn: Please share your numbers and assumptions. As a guy who is on the record with the Boston Business Journal as saying your biggest pet peeve is “misinformation”, I'm sure you'll be glad to substantiate your claims with hard data in a forum that is open to public scrutiny. This is your chance to silence your critics and set the record straight!

    Please post the following information for the 134 properties used in your sample in Excel format on a web server and provide a hyperlink. Scott can help if you don't have the facility to do this on your own:

    purchase date
    purchase price
    sale date
    sale price
    property identifier (MLS #, address, etc.)

    Also, please provide information on how your sample was created including any filters or assumptions that were applied in selecting this pool of properties.

    Thanks in advance.

    Posted by Lance Stapleton September 15, 09 10:20 AM
  1. Wait, you mean someone with a vested interest in real estate took numbers and presented them in a way that makes things look better than they probably are? That's a first.

    Posted by Bobby September 15, 09 10:45 AM
  1. His analysis is critically dependent on when the sales were made? If the a significant number were made in 2008/2009 then his point carries water.

    Not so if 110/134 sales were made in 2005-2007

    Posted by WSJevons September 15, 09 11:00 AM
  1. Looking at sales all the way back to 2005 doesn't make any sense. 2005 was the peak of the market, so of course anyone who sold in 2005 sold at a profit, as did nearly everyone who sold in 2006 and 5-year-plus owners who sold in 2007. And since volume is way down in 2009, most of the sales in the 2005-2009 window are weighted toward the beginning of the window, when the market was a lot higher.

    By the laws of supply and demand (and I'm talking econ 101, not the fuzzy "supply and demand" of punditry) in order for equilibrium prices to stay level while equilibrium quantity falls, there has to be either a downward shift in the supply curve (i.e. fewer people willing to sell at a given price). That just doesn't pass the smell test.

    Posted by James September 15, 09 12:20 PM
  1. Taking the properties you singled out, I found the following for 2009 in masslandrecords:

    + There have been 2 sales this year at IC/500 Atlantic: one lost 13%, the other made 24%.

    + At the Ritz (1 Avery), 1 sale: 0%.

    + At One Charles, (1 Charles) 2 sales: 5% loss, 7% gain.

    I excluded holding period that extended past 2005; parking; sales less than $100; and one at IC that sold for 300 in 2006 and 1050 in 2009.

    Take what you want from the facts.

    Posted by WSJevons September 15, 09 01:15 PM
  1. lets see the stats - they sound laughably cherry picked.

    I think 100% of people who bought in 1990 and sold in 2005 made money. This means selling at the peak of the bubble is good. Couldn't agree more, that's when I sold.

    How did people who bought in 2005 and sold now do?

    Ask Ahearn what he thinks of things at Penny savings Bank. How many of those buyers are above water?

    Posted by charles September 15, 09 09:42 PM
  1. WSJevons, where did you get your original sales prices?

    Posted by John A Keith September 15, 09 10:06 PM
  1. One thing I forgot to mention yesterday... Kevin Ahearn's study does make one strong point. As I have said many,many times before Boston is still a seller's market. Despite continuing declines, market prices remain far above intrinsic value for most real estate. Smart sellers know this and are aggressively cutting prices in order to get out now before the market truly collapses.

    Sellers today look back on two years ago and kick themselves for not getting out. In another two years, people will look back on today and say the same thing. Prices will fall much more.

    P.S. I'm still waiting for numbers from Kevin Ahearn...

    Posted by Lance Stapleton September 16, 09 10:28 AM
  1. WSJevons - I assume those numbers are pre-transaction cost? Which given 5% agents fees plus, adds up quickly.

    Posted by charles September 16, 09 10:59 AM
  1. There is no value to bundle the years 2005 and 2009 for any data point in the real estate market. The author is assuming 2005 and 2009 are in the same era or trend line. Two years are in an up market and 3 years are in a down market.
    An equivalent analysis would be to include the years 1922 - October 1929 into an analysis of The Great Depression. Since it is of no value, no one does it.

    Posted by lama September 16, 09 12:22 PM
  1. John Keith - I assume Masslandrecords. You can extract a lot of individual data from there, though I don't know how to get bulk data out.

    Still, if you identified the suspects, and there aren't that many high end condo buildings out there, you can search on an address and date range and build a spreadsheet.

    Scott, any chance you could get Ahearn's response to these critiques?

    Posted by charles September 17, 09 12:45 PM
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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