We’re nearly 11 months into 2023 and the theme has been well established at this point in our calendar: cash is king! The market has demonstrated a nuance like it never has before. While the “easy way out” would be to leave it at the fact that the market is “softer” or “harder” than it’s been in a few years, the truth is that the cash buyer is alive in a way they have not been in recent memory.
In our own business at Columbus & Over Group, we’ve seen cash buyers take down nearly 50 percent of the transaction activity we’ve been involved in (more than 75 deals and counting). Across the market, the data is not as readily accessible but anecdotally we see it up 3-4x from where it was when mortgage rates were hovering at the bottom of the ocean.
Undeniably, this has been a difficult road for most (urban) sellers in 2023, with articles in major news sources blasting headlines such as:
- “The housing market is headed back to a 1980s-style recession, Wells Fargo says—and it’s all because of ‘higher for longer’ mortgage rates” – Fortune
- “Over a third of NYC homes for sale get taken off market without finding a buyer” – NBC
- ‘Difficult to stomach’: Rich young Americans are ditching the dream of homeownership – MoneyWise
The suburbs, by comparison, have maintained their advantage that they took over back in 2020 even though those inner suburban markets that we watch have let off some of their inferno style heat from 2021 and 2022.
Looking at some specific deals in Boston, one unnerving trend that we’re witnessing is the growing number of deals that are happening below the same home sale price from the last handful of years. In other words, homes that are selling for the second time in the last five years but are trading for less than the previous sale. This is something we virtually never saw between 2014 and 2022.
- In Beacon Hill, a single family home traded for the second time in less than 6 months at 21 Branch Street! The first trade achieved $3,225,000 while the second trade dropped to $3,200,000. During the brief ownership period, the seller did some improvements to the home. Ultimately, this was a $25,000 dip (before paying for renovations, commissions and transaction costs!).
- Another Beacon Hill property saw a staggering decrease from its previous sale price of $5.665M in 2019 to its recent trade at $3.875M – that’s a 30%+ plunge in value (again, before transaction costs!)
- In the Financial District, the Boulevard is a new construction product from 2019 which sold well originally across its 33 units. This fall, unit 901 traded for $3.15M. Doesn’t sound too crazy until you realize that it originally sold for $4.02M, a 22% decrease in 4 years.
These fluctuations and bluntly, capitulations, within the Boston luxury real estate market paint a fascinating picture of a real estate landscape where the middle segment of the high-end market has really struggled to maintain value. In September and October of 2023, 11 properties were sold between $3 and $4.5 million. This is a significant dip compared to the 21 sales that occurred in the same category during 2022. Moreover, the average pricing of the 11 deals in 2023 versus the 20 deals in 2022 are down more than 15%. On the flipside, an impressive 20 listings soared past the $5 million mark during this period, indicating superb appetite for the ultra luxury market.
Each year we look at the $2M+ Boston real estate market in as much detail as any firm in the city. We define the luxury market as $2M and above while acknowleding that the ultra luxury market is $4M+.
With all this information at our fingertips, it begs the question, is this a good time to buy in Boston or not? As always, the answer is: it depends! We are ardent believers that if you have the right hand you can make a great play buying in today’s market. If you’re relying on debt financing, maybe this isn’t your moment but that doesn’t mean to sit back and relax… If you work hard enough, you may find a deal that prices well below where the market has seen the property’s value in the last 5 years. At that point, it might be worth striking as we are not anticipating any sincere roll back in demand for Boston housing in the foreseeable future. There simply is not enough property coming out of the city’s development pipeline to support the demand that we feel day in and day out.
Get in touch with a COG advisor to chart your path into this special piece of the global luxury real estate market.