Price drops have seen a dramatic spike in South Boston in the last few months and the number of properties going for over asking price has seen a similarly dramatic decrease over the same period. Some see these two factors as ominous signs for one of Boston's hottest real estate markets, but is there really a slowdown occurring in Southie or is the neighborhood just finally starting to feel the effects of the skyrocketing prices over the last 24 months?
The median days on market continue to be fairly low at 45 days thus far in 2014 and prices continues to increase at an impressive rate with the average sale price for single families and condos climbing over $30,000 to $533,1040 in 2014. Even with these examples of the robust nature of the market there are a few trends developing that have lead to a sharp increase in price drops over the recent months. Below we tackle 3 factors currently influencing the South Boston real estate market:
a) Overpricing - This one is the most obvious reasons for the increase in price drops and one of which both home owners and realtors are equally guilty. With the consistent increases in sale prices locally and the lightning fast time in which sales have taken place, it becomes easier and easier to overprice a home out of the gate and overshoot buyers' expectations. This ultimately results in a longer time on market and the need to drop in price. This overpricing accounts for the vast majority of what is going on in the neighborhood now, as demand remains extremely high but buyers are suffering sticker shock from the seemingly endless rise in list prices in the neighborhood. It is more important than ever for both home owners and agents in the neighborhood to be realistic with their prices out of the gate as it allows all parties to not only receive multiple offers and all important leverage in negotiations, but helps to contribute to the overall health of the neighborhood market now and going forward. If overpricing continues to increase we'll see even more price drops, longer time on market, and eventually a slow down in the market.
b) Increase in Inventory - As of right now there are 88 condos and single family homes actively for sale in South Boston. Last year at this time there were 64. This has contributed to the rise in price drops by giving buyers more options. With this added inventory buyers simply aren't feeling as pressured to move as quickly on properties as they were just a year ago. The recent increase in inventory is largely a factor of a few large blocks of new units being released at once on the West Side of Southie and may well be negated by the middle of 2014.
c) Neighborhood Affordability - For many years South Boston was seen as the place in the city to get the most bang for your buck while still having easy access to downtown. With Southie's average sale price climbing to over half a million towards the end of 2013 buyers looking for value began to look to other areas of the city like Dorchester and Roslindale. This shift has positioned South Boston to more regularly be compared to historically desirable neighborhoods like the South End and the Back Bay. With this change in perception and the shrinking gap in costs between Southie and Boston's other hot markets what can South Boston do to continue to reinvent itself? Add amenities and lots of them. Thankfully for the neighborhood's long term health, developers are answering the bell with new restaurants, coffee shops, entertainment and shopping popping up seemingly daily. This increase in amenities and the entrance of the Seaport as a city hotspot continue to increase the desirability of the neighborhood and reduce the importance of simply being priced lower than other Boston communities.
Southie continues to change and the prices should continue to increase along the way as more amenities are brought in and the Seaport continues its face lift. That being said there are some small hurdles to overcome in the short term to continue the upward trend.
Connect with Justin on Social Media: