Waterfront Condo Prices ‘Skydive’ In Boston
The Boston Herald takes us back to Massachusetts. “Boston’s waterfront, the epicenter of a high-rise condo building boom, is starting to see a trend that might make even the most bullish real estate investor flinch, skydiving prices.”
“The average price of a harborside condo perch plunged nearly 40 percent during the first quarter compared to the same period last year, falling to an average of $564,944, according to the Listing Information Network.”
“That’s down from $902,644 in the first three months of 2005, widely considered to be the high-water-mark of the recent, record run-up in real estate prices. The price declines came even as the number of waterfront condos sold more than doubled.”
“The disturbing data emerges against a backdrop of frenzied construction activity, with developers racing to open a pair of glitzy new waterfront towers, one near Rowes Wharf and the other on the North End’s harborfront. ‘The overall market is still very slow,’ said (broker) Brian Rugg.”
“Would-be home sellers clinging to dreams of a real estate jackpot amid a down market now face a surprising new foe, their friendly local real estate agent.”
“With a growing backlog of unsold homes and condos across the Boston area, some brokers are declining to take on new listings that involve sellers with outsized dreams of real estate riches. In a down market, brokerage shops have to be more selective. For every home or condo that doesn’t sell, brokers still have to shell out money to list and advertise, note real estate executives like John Ford, who runs a small Beacon Hill shop.”
“It is a tactic that one well-known local real estate researcher, Wellesley College’s Chip Case, believes harkens back to the last big real estate downturn that began in 1989. ‘They need deals, bad,’ Case noted. ‘We certainly haven’t seen it since the mid 1990s.’”
“The brokerage shops turning to this tactic range from one of nation’s biggest residential real estate firms to small and mid-sized local shops. Traditionally, brokers aggressively went after every listing, outrageous or not. With the business in hand, the broker felt he or she could later talk down the seller, executives said. No more.”
“While Rugg told brokers they are to go all out in the pursuit of homes and condos to sell, they were also told not to come back with grossly overpriced listings.”
“Ford, whose Beacon Hill firm specializes in high-end properties, recently found himself turning away prospective sellers for the first time. ‘I am getting killed on advertising costs,’ Ford said.”
Thanks to the readers who sent these links in.
Memo to Williamsburg, Brooklyn condo builders (and Greenpoint, Brooklyn arsonists): Keep your eyes on Boston
Arson was my first thought when I read the Times article.
Question is whether these well-connected developers will be pursued by municipal authorities or let off the hook when they resort to these tactics. Hundreds of firefighters (who could never have afforded the very condos-never-to-be that are being torched) put their lives in jeopardy to fight the fire; local businesses and residents live with the blight, and city taxpayers foot the bill.
I can’t even imagine how bad it would suck to be sitting in a harborside condo that I had bought a year ago for 900k that is now valued at 560k. I would be ticked if I spent a few hundred dollars too much for a car after getting jobbed by a car salesman (which has never happened to me by the way, luckily).
But 360k is something I’m just not sure I would ever get over.
BTW, in all honesty, you’ve got to wonder about the sample size they’re talking about with the harborside condos. 900k down to 560k? That’s unbelievable.
And then when you try to sell, no agent will list it. Maybe that will be what saves the MLS — all the FSBO and alternate venues will be overpriced, greedy sellers.
I suspect FSBOs will be toast. The raison d’etre for most of them was to squeeze out the last dime of profit. That probably worked well for many of them in a hot seller’s market. Poof — it’s mid-2006, you’re a buyer and you have too many homes to look at. Are you going to call a lot of individual FSBOs or are you going to find an agent and have the agent do most of the legwork?
Not to mention downright dangerous.
http://www.rep-am.com/story.php?id=6231
“DOVER, N.H. — A judge said he will allow testimony from two women who say the accused “Real Estate Rapist” visited their homes shortly after he allegedly raped a Dover woman.
Oliver Hooper, 34, was indicted in the assault of a 19-year-old woman last summer. Prosecutors say Hooper, a traveling salesman, faked interest in buying a home in Dover on July 26, forced his way inside and raped the woman at knifepoint. His trial begins Monday.”
Talk about your f-d sellers
Comment by Getstucco
2006-05-04 17:12:42
Talk about your f-d sellers
____________________________________
LMAO
ooh, sorry but can’t resist saying that’s just not funny…
never thought about that as an issue for a fsbo, jeez.
to get onto a different subject, OT, but John Malkovitch just appeared on Jon Stewart and said he’s *renting* in Boston right now
No, they didn’t talk about RE, but it was fun to hear Malkovitch talk about sharing driveways (Jon seemed a little shocked).
cheers…
WOW - even I am amazed at the speed of this train wreck!
Mat Damon, condo crash, NOW the “Big DIG” has massive fraud! Go figure!
“BTW, in all honesty, you’ve got to wonder about the sample size they’re talking about with the harborside condos”
The article said the number of units “more than doubled to 86″, so one would assume about 40 units sold last year. If the number of units last year was 10 I would agree that it’s suspect, but 40 is a decent sample size.
Not to mention that a move of that magnitude puts pressure on ALL price points.
I work in downtown Boston near the waterfront. I can tell you there is a glut of unfinished luxury condos. The developers are not stupid. They rather get out now with a small profit than a loss be this time next year.
Time to recast the NegAms boys!
I didn’t do the numbers did they hit 110-125%. If so the press just killed that complex
There has never been a better time in US history to be born rich (except for maybe 1930)…
If your dad is a corporate CEO, then what is a drop from 900k down to 560k? Nothing but pocket change. For most of the rest of us, you can translate that drop into more than ten-years worth of savings (at least for those of us whose savings rates are greater than $0/year).
great point…this whole scene does smack of that period doesn’t it?
Sure prices are falling, but are the same types of units selling (ie perhaps there were a lot more 2br sold last year) this year compared to last? I wish we had the data. A 40% YoY price DECLINE just seems way too much to be comparing apples to apples.
David
http://bubblemeter.blogspot.com
I’m not TOO surprised.
Just as an example, there’s a neighborhood I’ve been tracking since winter in Seattle. In late 2004, homes there were selling in the 400K area. Last summer, they started coming on at 1.2 million. Since then a handful have sold at the new improved price. But most have just been sitting for months.
I won’t be at all surprised to see homes in that neighborhood going back down to 500K at some point in the next year.
Because the run-up was simply outlandish and there was no REAL reason for that high price in the first place.
There are going to be some really pissed neighbors on those streets- great place for a block party!
The link about the realtors refusing to take certain business is really interesting. It really shows how the mindset of the agents got blown out of proportion during the bubble. In most industries, if a company were to act as a reseller for a product, and you were to make a sale that would net you a commission of 18,000 (3% of a 600,000 home), you would expect to invest at least a man month and up to 30% on marketing-sales costs. Now, as the market cools, you have these guys bailing out on business that they don’t think will turn around in a couple of weeks-spoiled rotten. It raises a really interesting point, as these markets tank, will some sellers even be able to find decent realtors who want to work with them? I can see the realtor’s point-if they have someone coming in whose “absolute must have price” is 40% more than the market will bear, how much time and emotional energy (and money) are you going to waste on that person, only to have them switch to a realtor who “says he will get that price for us” or pull their house and sulk after wasting these resources? I’m sure a good realtor can smell these types before he sees them-when the market was shooting up they would probably take them anyway, figuring that the miracle spike might actually make their dream come true. Now forget it. So, these people will be even more in trouble, as they will end up with the worst realtors that just tell them what they want to hear.
A 1% non-refundable listing fee, creditable towards the 6% commish if it actually sells, would take some of the overpriced sellers out of the running.
1.) Thats a hard sell
2.) Would keep the weak in the game making a living off the 1%
Million dollar condos in Boston?
That gives me a headache.
OT- Isn’t today the day the CAR supposedly releases its first quarterly housing affordability report? Can the statewide number be lower than 14? I’d guess it’s about 12 based on higher rates and still-increasing median prices.
Hopefully this points to a round of mediocre realtors (easy money types) getting out of the market-during the boom you really could use almost anybody out of the yellow pages and make a profit. Now, a lot of people are really going to think twice about using their brother in law (”realtive” from a post on patrick.net) or their coworker who is a part-time agent just to preserve good relations-a decent realtor (maybe 10-20% of the population) really may be able to move your home in a dismal market by being honest about what you can expect on price, giving good advice on improvements that actually make a house sellable, and doing some actual work in finding clients. I really think that the majority of realtors don’t know what this entails-they are so used to telling clients that the house should sell no problem etc., how beautiful it is etc. Holding one open house is not going to cut it anymore. Someone who actually sells a house in a situation like this for any type of reasonable profit earns their 6%-the majority will not. I recall an open house I went to in Mpls about a year ago-the realtor was a 25 year old kid who was obviously hungover and was watching golf on a 12 inch TV he had brought. When we knocked, all I heard was “come in”, no handshake or anything. I am not much older than this, so midway through the conversation, he actually said “I gotta apologize, I had kind of a rough night last night.” Also told us that he had tried a few different things that didn’t pan outand now had decided to join his dad in the family business. God, I hope a burst wipes losers like that out of the industry.
The sample size here has to be off. Don’t get me wrong I love to see this. Whats even better will be all the sheeple from Bawwston who read this and get to scared to buy.
sure the sample size of actual transactions are small..
But as appraisels go, latest transactions bring in the numbers.
And since the “rental value method is still way off the charts ..what else are they going to use….
TTTTTTTTTiiiiiiiiime is on the buyers side… oh yes it is!
Does any one have a better tactic for not adding to the MLS rolls daily.
I am sure they have enough homes & condos to try to close.
If this is their plan then let watch for the F i S B o e s..
you can find those on “foreclosure .com”
From NEW’s recent filing (per OC Register):
By the way, 3.44% of New Century’s overall pool of total loans it services weren’t current in some form (from just late to foreclosed) at year’s end 2005 vs. 1.58% for 2004 and 0.84% in 2003.
ahh,
this brings back memories of the good old days. moved to boston from denver in 1987. paid first, last, security and a “finders fee” to the realtor for a rental in the north end. speculators were buying four or five condos units at a time, rowes wharf was a hot commodity and bridge loans were all the rage. mcdonalds was paying signing bonuses. i was told that i was a hick from out west and boston was not texas or colorado. 18 months later even the revere beach and lowell connector condos at $100k weren’t moving, bridge loans were being called and investors were getting creamed. the bottom of the market- six years later in 1994, after real estate buried just about every lending institution in the region. dime saving, comfed savings bank, commonwealth all collapsed under defaults and corruption. loan officers and middle managers were marched out of buildings in handcuffs. those stated income deals really did have some consequences to both the borrower and the lender. this cycle could be far worse, as the players are more numerous and the stakes are much higher. imho.
The order of these things has been different this time around.
First, there was a rental shortage. The local universities had stopped building dormitories yet continued to expand. By 1997 you had to either know someone or pay someone off to get a decent rental property.
In 1998 you could still buy for less than the cost of renting, but that did not last too long. By 2000 you could not buy an investment property and get a worthwhile ROI, but money fleeing the stock market drove more growth. By 2002 BU, NorthEastern and Suffolk finished large dormitory projects and the bottom dropped out of the rental market.
That should have been the end of the price increases. In fact, at this time II was trying to sell a marginal condo in brookline, listed it for $360K based on comps, and after seven months sold it for $315K in April 2004.
For some reason, the spring market in 2004 revived, and in retrospect the following two years of 20% growth per year must have been pure speculation driven by easy money. The 40 to 45% estimated correction sounds about right to me… that is, if anything, a generous estimate of the correct prices around here.
Bolderbo-
Very apt, accurate, and honest description of the last NE real estate bust.
Deja vu 2008.
(I can’t even imagine how bad it would suck to be sitting in a harborside condo that I had bought a year ago for 900k that is now valued at 560k.)
Nice to live in for $300K, however, and if the land price is reasonable and construction slows down I’ll be builders can make money at that price. Yes the $600K was pure profit, one reason why builders went nuts. But the price is bound to fall to the construction cost plus a low land cost, according to real estate economics theory.
Not Boston and not condos, but here in Colorado Springs, I’ve seen the first major price reductions. For the past year I’ve been tracking property in the prestigious Old North Side, searching for a 4 bd, 2 ba (minimum) house in the $275K - 1 million range. In January there was 14; now, that number has almost doubled. Today, for the first time, I noticed MAJOR price drops on homes that had sat on the market for months. Here’s the first:
http://themartys.springssearch.com/browse/IDX1_Final.asp?MyNo=569120
They started listing it at $969K late last year and just shaved off $30K — not bad, but not yet tempting, either.
How far is that from Eagle, I was up in Eagle not too long ago and saw houses newer and larger than that for about 450k. I’m just curious
$450K in Eagle? Je$us H. Chri$t! My dad used to take me caving in the hills south of Eagle. It was a cow town then. People must be considering it a suburb of Vail/Beaver Creek.
Eagle is hours northwest of Colorado Springs. A long trip, best made by driving the 70 miles north to Denver and then taking I-70 west over the continental divide.
http://themartys.springssearch.com/browse/IDX1_Final.asp?MyNo=576716
This one (which is beautiful — I went to the open house) has sat on the market for months and months at $799K. The $50K reduction is not too shabby, though I’d love to know what they paid for it, and when — I still think it’s too pricey for the local market, although some California equity nomad might think it’s a good deal.
I wonder what it sold for in 1899?
The price is a matter of public record. Check out your local assesser. Tho you need an address.
http://land.elpasoco.com/asr_instr.asp
You can also look up the property history on Zillow.com
Wondering how closely the Boston situation will translate to the harborside in, say>>>>San Diego…
Ya think it’s gonna be about the same? worse?
The San Diego experience will more closely resemble a hang-glide from the cliffs of La Jolla down to the beach below than a skydive
Yeah if you consider hang-gliding w/o the actual glider. I’d say it’s going to be more like a suicide jump off the Coronado bridge. I am sure the jump will have a great view of all those vacant high-rises littering downtown.
BeaConst — Whatcha think?
This is excellent news. I look forward to seeing this trend spread west, and from condos to houses.
LMAO!!! NAR now has a blog.
http://narblog1.realtors.org/mvtype/narinthenews/
They didn’t post my message…
And they probably won’t. Their too cowardly to post the truth.
I said something like - As a buyer, I should buy an FSBO since you guys overcharge…lol
I was tooling around realtor.com, looking at 02110 (the only place in downtown BOS that I would live), and I was amazed that, regardless of price, the new construction condos have about half the square footage of the old construction condos. If they’re building new 1500 sqft condos, I sure can’t find them. And who (outside of NY) in his right mind pays high six-figures for 700 square feet?
Ummm try L.A. or SF if your looking for kindred spirits
they are donig so in vegas
You wan’t 1,500 sqft? we have them here in Downtown San Diego. Chump change at $1.7mil.
“Ford, whose Beacon Hill firm specializes in high-end properties, recently found himself turning away prospective sellers for the first time. ‘I am getting killed on advertising costs,’ Ford said.”
Oops. If realtors aren’t even willing to list overpriced properties anymore, how is it possible for the median price to continue to rise? Oh, well. Even if the realtors would list them, buyers have too much inventory to tour to even look at you’ve-got-to-be-kidding priced homes anymore anyway. There goes the median.
It is not rising in MA any more, or at least for the past 2 months on a YOY basis…
Just saw a blurb that 20/20 was going to have a special about boom/bust
tomorrow @ 10est.
Awesome… will watch that one
Thanks
Just went to the 20/20 website. I read the story they have posted about real estate. I don’t know if this is what they will be covering tomorrow or if it is an older story as there is no date. But I about died laughing when I got to the last page and realized it’s basically an ad for condoflip.com
http://abcnews.go.com/2020/story?id=1923550&page=1
OT, but this is a great article. The quotes are killer.
http://www.denverpost.com/business/ci_3765313
Basically about how Generation Y is getting into the housing mkt at an early age, using interest only no money down, and think it’s going to turn out “sweet”. The kid they feature is such a poster child, he also works as a mortgage broker. Like to see this guy’s balance sheet in 5 years-I’m sure he is investing what he “would have” paid in principal.
Oh my GOD, what a stupid A**. The media makes it sound so hip, so cool, so right. Damn, this guy is stupid.
The thing about that generation is that they have “Helicopter Parents” as in they are hovering over them just waiting to pull them from the first sign of trouble. When people talk about bailouts, the first recourse isn’t going to be the govt-it will be dad: “Daddy, ehww, I lost my job at Ameritech today with no notice! I went to get a HELOC to make my car payments and have a little pocket money but they say they can’t loan me money on a house where I have no equity!”
ALso, did a web search on this story’s hero-he was a collegefootball player at Valpraiso-the perfect candidate for a mortgage co with their ra ra bs. Too bad this kid didn’t take a finance class during his tenure.
There is one Generation Y fool who was fooled by randomness…
I was watching some travel show on Tokyo with my 6 year old last night (was fun!), travel channel I guess, and they advertised some reality show “this job’s a trip!” ( I have so little tolerance for reality shows…don’t know none of em) where the next episode would have some young guy who was a mortgage broker by day and an exotic dancer by night, seeing if he can make it as a firefighter…I liked that image…
Virtual realty: Will real estate agents go the way of travel agents?
here’s the (Pittsburgh Post-Gazette) Scripps Howard url: http://www.shns.com/shns/g_index2.cfm?action=detail&pk=NOA
GENTS-05-05-06
Sorry. Somehow, the url is not compatible with the blog… Has everyone gone condo crazy? I can’t understand the endless attraction.
Check out this ridiculous page from Merchants Mortgage, the firm that employs this youth. On another thread people were wondering if ‘banks’ loan to LLCs etc. This is just hard to even read:
PROGRAM HIGHLIGHTS:
Merchants Mortgage lends up to 90% of the purchase price and additionally lends 90% of the improvements that the borrower estimates they will make to the property. The borrowers are allowed to do work to the property themselves as it is not required that contractors complete the work.
We can use equity in other properties (known as cross-collateralization) for the downpayment on the fix-and-flip property so that the borrower does not have to put cash into the transaction, provided that our loan-to-value and other guidelines are met.
We allow the properties to be titled in the name of corporations, partnerships or limited liability companies. This is very popular with fix-and-flip investors.
Borrowers who are self-employed find the loan quick and easy to qualify for because we have flexible income underwriting.
We do not have a specific limit on the number of investment properties that the borrower has financing on.
We close these loans very quickly. We typically provide approvals within 24 hours and many closings occur within 1 (one) week of approval. Our quick closings often help the buyer get a contract over other prospective buyers.
We do not have any prepayment penalties. Naturally, this is of great importance to fix-and-flip investors.
We allow partial releases of multiple unit properties.
Thats a hard money lender they will lend to your poodle if the LTV is right.
Man, I am behind what these place have come to, they actually ADVERTISE no income verification? Can someone explain how exactly these companies get around banking regulations? Is it all because those are FDIC regs and only apply if you have real depositers, not investors? Don;t these loans get sold to banks that have such depositors?
Purchases
Refinances
Fixed-Rates, Variable Rates, 15-Year Amortizations, 30-Year
Amortizations, Balloon Products, Etc.
Owner-Occupied
Second Homes
Non-Owner Occupied (For Long-Term Rental Properties)
Stated Income
No Income Verification
Jumbo Loan Amounts
First-Time Home Buyer
Ground Up Construction-to-Permanent
the loans get funded by mutual funds that invest in supposedly safe bonds
It’s possible that they are dumping these trash loans into securitizations. But that is unlikely. Typically loans intended for repacking into bonds have to meet certain standards. Google “conduit loan” for details.
If they are tossing this into a CDO, the AAA rated tranches should be safe. Those are usually protected by a massive amount of over collateralization and requirements about the quality of the loan pool. However the “credit enhancement” tranches will be fucked, and fucked good as they take the losses to protect the AAA tranches.
Now to go with your 50 yr mortgage-how about a 7 year car loan:
Longer car loans gaining in popularity
Allison Bisbey Colter
Dow Jones/Associated Press
May. 4, 2006 04:56 PM
NEW YORK - Just as the once-rare 40-year mortgage is enjoying a surge in popularity, U.S. consumers are increasingly opting for auto loans that let them lower monthly payments by spreading them out over longer periods of time.
Last year, for the first time, the majority of auto loans were underwritten for five years or longer, according to a study by the Consumer Bankers Association. The percentage of new car loans of more than 60 months jumped to 55 percent of the total in 2005, from 45 percent in 2004. The percentage of new auto loans with terms of five years or more has more than doubled since 2001.
People buying used cars are somewhat less likely to take out a longer loan; those with terms of five years or more accounted for 40 percent in 2005. advertisement
Just how long are the longest loans? The study found the maximum maturity on new car loans averaged 77 months in 2005, unchanged from 2004.
It appears that borrowers are using these loans to buy cars and trucks they otherwise might not be able to afford: the size of the average new vehicle loan rose by 4 percent last year to $23,534, from $22,638 in 2004, according to the study.
The size of the average used vehicle loan size also rose by 3 percent to $16,419, from $15,961.
CBA spokesman Fritz Elmendorf said that while consumers may be stretching their finances, auto loans are still performing well. The percentage of new vehicle loans with payments greater than 30 days past due fell in 2005 for the fourth consecutive year, in dollar terms, to an average of 1.08 percent from an average of 1.16 percent a year earlier.
The average delinquency rate on used vehicle loans also declined to 1.95 percent last year from 2.1 percent.
Unlike the mortgage market, where consumers are taking out bigger loans because house prices are rising, the growth in the size of auto loans may reflect the fact that car buyers are requesting additional features, Elmendorf said. “For the truly bargain conscious, there are great deals at the lower end of the market,” he said.
Still, the trend bears watching because, unlike houses, which tend to appreciate over time, cars lose a large percentage of their value as soon as they are driven off the dealer lot. So the stretched out loans are likely to bring an increase in the percentage of vehicle owners who have loan balances higher than the value of car or truck that secures it.
The CBA study doesn’t break out loans by the credit quality of the borrowers, although Elmendorf said most of the participants were prime lenders.
Traditionally, lenders have been more willing to extend loan terms for borrowers with better credit.
But there are signs that longer term loans are also available to borrowers with less-than-stellar credit. Credit rating agencies say they are seeing increasingly large percentages of loans longer than 60 months in securitized pools of subprime loans.
While consumers may prefer longer loans, the CBA survey found that the lowest auto rate, at about 5.5 percent, was available on loans with terms of four years or less. By comparison, rates on loans of five years or longer approach 7 percent.
While ultimately auto loans add to the credit bubble, the overall value of these loans is a drop in the bucket compared with the Trillions of dollars in the mortgage market.
I am simply amazed at the low rates that are offered on car loans these days. My wife and I purchased a new Acura MDX in March and went to a credit union and got a 4.9% rate for 5 years. That was pretty much the same as a 5 year Treasury at the time. So I guess we are as good a credit risk as the full faith and credit of the US-Gov? No risk premium there.
I bougth at 2004 Honda with 2.9% financing. In fact Honda is paying me aproximately $240 a year to drive my car!!!!
Well, get this, I bought my last car by taking advantage of a credit card offer of a balance transfer that was 2.99% FOR THE LIFE OF THE LOAN. As long as I don’t miss a paymnet or anything, the CC company electronic deposited the money to my checking. I then wrote a check off this. This is an unsecured loan, unlike a car loan that is at least secured by a (rapidly depreciating) car. If I defaulted they might be able to get my car after some legal proceedings, or maybe not…I do not plan to default on this of course, but this let me get get $1000 dealer incentive by paying cash, my alternative if I financed at the dealer was a promotional rate of 4.5%.
You could hedge and take out some of that unemployment insurance that pays the minimun due each month, just in case you ever lose your job….
So I guess we are as good a credit risk as the full faith and credit of the US-Gov? No risk premium there.
Given the current state of the US finances, I believe it.
Denver home market having problems:
http://www.denverpost.com/business/ci_3786592
Buyer representatives are telling him that about half the homes priced under $250,000 are either in foreclosure, are owned outright by a lender or the U.S. Department of Housing and Urban Development, or are selling for less than the amount owed on the mortgage, Jalowsky said.
Hmmm, I heard a couple of coworkers discussing this in the hall the other day. Wonder how many closet bears there are in the Boston area these days.