The Boston Real Estate Apocalypse
David Bates / April 11, 2013-2:04 pm
(This post originally appeared as my April 10, 2013 column fo rwww.Boston.Curbed.com)
The following is a letter from the future. It does, however, recap actual events from January 2012 through April 10, 2013.
To Whom It May Concern:
I report from Boston’s real estate future, with a sound mind and clear conscience. And, although the Hub’s real estate environment has forever changed, I know I did what I could to avert it and to save others from the pain which unfortunately seemed inevitable. If some think I held back, I offer the following recap of my efforts to alert anyone who would listen.
It was January 2012, but I remember it as if it was yesterday. Downtown real estate agents started communicating that 50-plus people were attending each of their open houses. Heavy open house attendance was, of course, followed by heavy spring sales: a 25 percent increase in condo transactions.
In July, my reports began, and they would continue repeating like an annoying car alarm as I noted how low the Boston condominium inventory was. In August, I called the inventory a joke and noted the increasing percentage of properties that were selling super-fast.
In October, I wrote that the super-fast sales ratio was increasing. I suggested that if the pace keeps up “days on market” as a measure might become obsolete, and then suggested, albeit tongue-in-cheek at the time, that “hours on market” might be necessary. Who knew just six months later this would look prophetic?
In December, I saw the momentum in the market and publicly speculated whether Boston could run out of condos. In my last column of the year, I tried to prepare the public for what was coming and wrote about how to win multiple-offer situations. Unfortunately, my advice was geared toward situations involving four to five offers, not the 15-to-25-offer situations that would soon follow.
When the year turned, I fictionalized the Boston inventory crisis, the moral of the story being that there were no reasonably priced 2-BR, 2-BA condos available in Boston. Later that month, I charted the absurdly low inventory in many key Boston neighborhoods. In February, I noted the market’s inhuman strength and accused it of being on performance-enhancing drugs.
Like a dam ready to burst, it was exceedingly clear that the low inventory could not hold back demand. In March, I wrote about how new buildings were selling out faster than they could be built and how, at an unprecedented rate, buyers were paying more than the asking price. On April 10, I posted that anything under three months of inventory is considered a seller’s market and that Boston would soon have less than a one-month supply.
Why weren’t red flags going up or alarms going off?
The Boston Foundation had written reports, year after year, concerned about the region’s dire need to produce affordable housing. Why didn’t the region listen? For the love of humanity, why didn’t anyone respond? All the mayhem could have been averted.
In May 2013, real estate hell was unleashed. Fist fights started to break out at open houses. One woman, trying to get a broker’s attention so she could put in an offer, pulled a knife and threatened the crowd. A competing buyer shouted back, “Move to Framingham, b*#ch, because this condo’s all mine.” To ensure public safety, the city started requiring brokerages to hire police officers to keep the peace at any open houses they held.
Considering the danger, why wouldn’t the masses wait? Clearly, folks wanted the stability of home ownership, to experience the American Dream, and to take advantage of dirt cheap interest rates. It didn’t help matters that the rental market was out of control, too.
The final straw was when a melee ensued at a development site and it provoked a moratorium on construction in Boston. In other words, Boston had a fixed supply of condos and seemingly unlimited demand—indefinitely. The news fueled an incredible run-up in prices. In my next report from the future ,”Million Dollar Offers for Micro-Apartments?,” I will discuss how insane Boston condo prices got.
Until then, stay safe.
Bates By The Numbers