The Real Estate Rule of Risk and Two Boston Price Points
David Bates / June 24, 2011-12:34 pm
There’s an ugly prejudice occurring in the Boston real estate market. It’s not based on race, ethnicity, age, gender, religion or sexual preference. It’s based on price. Simply put: Buyers are not treating lower-priced homes the same as higher-end homes. Through May 31, “Under Agreements” for Boston condominiums listed under $700K are off by 20 percent. In the same time period, condominiums listed for $700K and above are 13 percent ahead of the sales pace a year ago.
This price prejudice is partly a result of Boston buyers choosing established markets over emerging and alternative markets. Under agreement activity in South Boston (-25 percent), Dorchester (-43 percent), Allston-Brighton (-21 percent) and Jamaica Plain (-20 percent) are all way off. Yet Boston’s most venerable markets — Back Bay (-.5 percent) and Beacon Hill (+13 percent) — hum along.
Another more subtle impact of the price discrimination is that larger units — because a larger percentage of their overall inventory is priced higher than $700K — fair better than smaller units. For example, condos over 1,600 square feet are only down 8 percent for under agreement activity in the first five months of the year.
The simultaneous decrease in lower-priced sales and increase in high-priced sales has resulted in a 7 percent increase in the median price under agreement for Boston condominiums, from $345K to $370K.
Why are buyers buying more expensive property? We will explore that further in this blog in the future, but for now one definite possibility is that they are just being risk-averse. After all, the old saying about risk in real estate is “the cheaper the property, the riskier it is.”