Residential real estate is in short supply in Boston and Brookline, there is no question. This week’s Wall Street Journal had an article about the first time home buyers getting squeezed due to the low inventory and surging prices around the country. Greater Boston is no exception.
The pressure on the younger buyers is coming from the lack of inventory and surging prices. But while the home market gets more expensive, developers seem to be putting much of their effort into luxury property.
Despite the opportunity in entry level and mid-level housing, luxury properties have been the focus of developers in Boston and Brookline, which may soon lead to an over-supply in the high-end market.
Looking at the Luxury Condominium market in Boston, defined as condominiums priced $1,500,000 and higher, here is a snapshot of three points in time:
- On April 19, 2015, there were 112 luxury condos on the market, with an average of 96 days on market.
- Six months ago, October 19, 2015, there were 144 luxury condos available in Boston with an average of 98 days on market.
- April 19, 2016, there are 166 luxury condos on market with an average 104 days on market.
As of mid April 2016, there is nearly 6 months worth of supply, which means if no new listings come on it will take current inventory six months to sell. This doesn’t count the projects in the pipeline, only those listed on Multiple Listing Service.
The population growth in Massachusetts, and Boston in particular, will eventually absorb these properties and the coming supply of properties….eventually. But expect the luxury market will soften in the meantime. Luxury home buyers are faced with options in the City, both in the variety of condominiums but also with the additional incentives of luxury rental properties popping up all over Boston.
All this luxe development is in the face of the shortage and decreasing inventory of entry level and entry level and mid-level housing for the young Bostonian population.
For condos priced under $1,500,000, the inventory of condos has shrunk 16% since last April, from 426 condos available late April 2015, to 357 condos on market 2016. This reflects approximately five weeks of supply, (to distinguish from the 6 month supply of luxury condos). The market is much tighter at prices below $1,000,000.
In Brookline, MA, where luxury condos are priced $1,200,000 and higher, the market is significantly smaller. But the trend is similar. Luxury condos in Brookline have a five month supply of inventory, while the rest of the market has a five week supply.
As the majority of the condo market trend in Brookline and Boston continues to tighten, the luxury market is more balanced and tamed. The very high end becomes soft and fluffy, while housing becomes less affordable to the first-time home buyers in Greater Boston.