2023 First Quarter Review
Batterymarch Insider
Batterymarch Group LLC is a full service independent real estate brokerage firm specializing in the downtown Boston market. “The Batterymarch Insider” is a brief snapshot of our current market thinking. These are our opinions, so take them with a grain of salt. As always, our “terms of use” apply. We encourage you to subscribe.
First Quarter Review – The Devil is in the Details
First quarter headlines we expect to see from the realtor community will read something like “downtown prices skyrocket.” Indeed, prices are up. The price per square foot for a Back Bay condominium rose by 10.3% in the first quarter, according to MLS data.
We wouldn’t read too much into the higher prices as the data was skewed by four $10 million plus transactions that fetched in excess of $3,000 per square foot. If we stripped out those four transactions, pricing was modestly negative. Apparently these buyers aren’t reading the Batterymarch Insider and it looks like they’re getting taken to the cleaners.
Short term swings in pricing generally have more to do with the mix of what’s selling. It’s never apples-to-apples and the data can be misleading – as is the case this quarter. A deeper look tells a starkly different story about the health of the market.
Year-over-year, Back Bay listings are up 58%, and the approximate month's supply of inventory now stands just shy of five months, a 112% increase. Closings in the first quarter were down an eye opening 41%.
It’s still early in the selling season, but many brokers historically do as much as 80% of their business in the first quarter, so the slow start isn’t a good omen. If the current trends continue, we’d expect to see sellers cutting prices meaningfully as we get into the slower summer.
The “600” – Slow Going
The “600” new condominiums (see “The 600 – Ready or Not, Here They Come!") hitting the market this year continue to overhang the market. In the short run these developments are pulling demand away from the existing high-end housing stock. Longer term, we don’t think that the market has digested the extent to which resales in these new developments will continue to disrupt the supply demand balance.
Winthrop Center delivered the first five units this week – five down and 312 to go. Developers usually tell buyers that there won’t be a lot of investor activity in new developments. Looking at the initial deed transfers, our read of the tea leaves is that these projects will be chock full of speculators.
Over in the Back Bay, Raffles is getting ready for their ribbon cutting and should be delivering the first of their 146 condominiums shortly. Like most developers, they’ve been tight lipped as to how sales are progressing. For months we’ve been hearing whispers that the project is sold out – we’ll believe that when we see it.
Down in the Seaport, it’s slow going in the sales department at the St. Regis. They started delivering units late last year, and by our calculation only 39 of the 114 units have been delivered. Maybe we’re right - people aren’t too excited about living at the wrong end of the wharf.
It’s not all doom and gloom. Well located good quality properties that aren’t ridiculously overpriced are selling, some quickly. There are pockets of good relative value downtown, but buyers need to have a disciplined approach to valuation. The demand is still there, and the market will clear when sellers stop focusing on peak market valuation and become realistic.
—————
About Batterymarch Group LLC – Batterymarch Group is an independent full service real estate brokerage and advisory firm focused on the downtown Boston high-end residential market. We represent both sellers and buyers with a sharp focus on valuation. We also offer sub-advisory and owner’s representation services to financial institutions, family offices, and trustees.
About Andrew Haigney – A 25-year Wall Street veteran, Andrew held senior positions at leading global investment banking institutions where he routinely valued and negotiated complex securities transactions on behalf of institutional clients. Andrew has been an outspoken advocate of a universal fiduciary standard. In founding Batterymarch Group, Andrew brings that same discipline and passion to real estate brokerage.