2023 Real Estate Observations (Boston, Newton: annual, history, compared)

[redplum33]

It seems like the market is as strong as ever for starter homes.

Not so much for the high end market.

[MikePRU]

Originally Posted by ca1337

Has anyone been looking at the close Boston suburbs lately around the 2M range and above (Newton, Cambridge, Brookline, Belmont, Winchester, Lexington, Wellesley, etc.)? I feel that I've been noticing a lull in the market, with houses at 2M "sitting" for 1 week instead of 2 days. I've been told a cooling of the market happened at the 3M range and is now trickling down to the 2M range.

Haven't noticed that and I'm in most of those towns on a daily basis. I have a few $2M buyers that have really struggled to find what they want but I think their expectations may be a bit more in line with where values were pre-COVID.

Originally Posted by redplum33

It seems like the market is as strong as ever for starter homes.

Not so much for the high end market.

I think you're painting with a pretty broad brush.

What do you mean by "high end market"? Top 1% most expensive homes in any town in MA? Some other definition? There are certain price points that no matter how hot the market is will be slow because only a small percentage of the population can afford them. For example, most $20M homes even $6M don't sell overnight. There are way more buyers at the $2M-$4M range but depending on the town you're talking about that might not be top 1% in that town.

At times, real estate very much breaks up into micro-markets. So, what's happening in one town is very different from another. Even within a town you get even smaller micro-markets. I remember at one time in Needham houses under $1M were selling like hotcakes and those over $1M were moving like frozen molasses.

Anyway, I'm just trying to say you're making a really broad statement which is probably not going to prove accurate a lot of places.

[redplum33]

Originally Posted by MikePRU

I remember at one time in Needham houses under $1M were selling like hotcakes and those over $1M were moving like frozen molasses.

^ This is a perfect example

[jayrandom]

Originally Posted by redplum33

^ This is a perfect example

This was the case in Westwood in 2014. I don't think it's as true right now. Looking at what has and hasn't sold in the past few months, I don't see a clear threshold price anymore. Most things seem to sell quickly and those that don't seem to be relatively well distributed across the price spectrum, leading me to believe the issue is with the pricing on those specific homes more than anything.

[ca1337]

Originally Posted by MikePRU

Haven't noticed that and I'm in most of those towns on a daily basis. I have a few $2M buyers that have really struggled to find what they want but I think their expectations may be a bit more in line with where values were pre-COVID.

What would you say the buyers expectations are at 2M right now in these towns? In terms of size, age, localization (no busy street, no corner lot, no highway nearby), etc?

I've seen a 2000 sq ft going for 2.6M, 600k above asking a month or 2 ago in Newton... But that was the most extreme example. Others still went above and sold in 1 WE but some even had time for a second WE, which I haven't seen in a while. And then some houses have been sitting so long they got pulled. Those needed more work, but not so much more than others I've seen selling in no time. It's just a bizarre market right now, like it's transitioning somehow.

[ca1337]

I'm just a buyer and new to the area, but from looking at listing history I feel like prices in the most desirable towns closest to Boston have gone up 10% a year for the past 10 years? Accurate?

[simplexsimon]

Originally Posted by ca1337

I'm just a buyer and new to the area, but from looking at listing history I feel like prices in the most desirable towns closest to Boston have gone up 10% a year for the past 10 years? Accurate?

Maybe, how will that affect your buy decision?

[jayrandom]

Originally Posted by ca1337

I'm just a buyer and new to the area, but from looking at listing history I feel like prices in the most desirable towns closest to Boston have gone up 10% a year for the past 10 years? Accurate?

Not completely accurate. There's this idea that the "good" towns appreciate faster than the "bad" towns and it just isn't borne out by the actual price increases. There will always be a price differential between the towns, but that tends to be a pretty constant percentage of home value averaged out over long enough time periods.

The reason is pretty simple, too. People will not pay an infinite premium to live in Newton. Eventually people will spend $500k for a nice house in Waltham over $4m for a shack in Newton. (It happens well before an 8x+ ratio).

Now people will pay 8x to live close enough to Boston as opposed to say, Pine Bluff, AK, because they might make 10x here as opposed to there.

Boston Magazine tracks prices over a 10 year period and you can see where has had the largest increase. It might be surprising to many that the big winner over the last 10 years is Lawrence, at 214% (using fancy logarithms, that works out to about 12% on average per year). Brockton is next at 194% and then Chelsea and then Lynn. All of these are towns most would consider on the lower end of the spectrum. Newton is in the middle at 100%. That 100% over 10 years works out to about 7%. Brookline was lower at 91%, Belmont higher at 113%.

What does seem to be true is that 'good' towns do better when times are bad and 'bad' towns do better when times are good (the 'good' and 'bad' are in scare quotes because they aren't really good or bad so much as expensive or not expensive). People aren't willing to be an infinite premium to live in Newton, but they are certainly willing to pay a considerable one.

[ca1337]

Originally Posted by jayrandom

Not completely accurate. There's this idea that the "good" towns appreciate faster than the "bad" towns and it just isn't borne out by the actual price increases. There will always be a price differential between the towns, but that tends to be a pretty constant percentage of home value averaged out over long enough time periods.

Oh definitely, I'm not saying "good" towns appreciate faster. But my question was about this subset of towns specifically. Like any investment, the lower you buy the higher the chance of large profit, IF you pick the right investment. It could stay low as well. You have to predict the future. That's where the risk/reward equation comes in. Also from a purely mathematical perspective, the lower the starting point is, the higher the % increase looks.

[MtPleasantDream]

Originally Posted by ca1337

I'm just a buyer and new to the area, but from looking at listing history I feel like prices in the most desirable towns closest to Boston have gone up 10% a year for the past 10 years? Accurate?

1.10**10=2.59 (** means exponential)

The price of today is more than 2.59 times of 2013 price in some desirable towns, but in most cases not so dramatic.
Also, a large part of the increase happened in 2020~2022.