Spring may have sprung, but the luxury condominium market is still frozen, with one expert forecasting no thaw until mortgage rates come down. iStock photo
Red hot for years, has the luxury condominium market in Boston finally lost some of its sizzle?
A pair of new reports suggests that things just aren’t what they used to be when it comes to the sale of posh, multimillion-dollar sky pads in the Hub.
Overall, sales of downtown Boston condos fell by more than 13 percent in the first quarter of this year to 360, down from 414 during the first three months of 2023, according to a report from brokerage Douglas Elliman prepared by well-known appraiser Jonathan Miller, part of a series of reports which track condo sales in high-end markets across the country.
Over the past two years, sales of condos worth $1 million or more in Boston’s core neighborhoods of downtown, Beacon Hill, the Back Bay and the North, West and South ends have fallen by roughly 20 percent, The Warren Group reports. Condo sales worth $5 million and up have also dropped, from 17 in the first quarter of 2022 to 13 during the first three months of 2024.
“The luxury market is pretty much frozen in place,” said David Crowley, a vice president and broker at One Boston Luxury Living|William Raveis Boston. “I don’t see any appreciable thaw to this situation. until we see a reduction in mortgage rates.”
Nor is it particularly hard to figure out where sales are lagging. One Dalton, the 60-story king of the luxury condo market, has several units for sale.
Most are owners who bought after the after the tower opened in the Back Bay in 2019, including a pair of 7,000-square-foot-plus units listed at $35 million apiece.
The St. Regis, which opened in 2019, in the Seaport sold 10 units last fall in what amounted to an auction. A total of 68 unit deeds have been recorded in the Suffolk Registry as of publication time, in a tower with 114 “uniquely exquisite residences,” per the marketing materials.
Meanwhile, hundreds of additional units have come online at the Winthrop Center tower in downtown Boston.
Old Tricks Come Out
As demand has cooled for super expensive units like these, some developers are rolling out an old financing tactic to get buyers over the finish line and maintain the illusion that prices remain untouched.
In particular, developers with condos to unload are offering cash back at closing, also known as closing credits.
Under this strategy, while a developer won’t budge on the price, he or she offers up 3 percent to 6 percent of the sales price as cash back, with the money to be used towards things like closing costs or paying condo fees, which in a super luxury condo building can be quite steep.
The developer gets their higher price, the buyer gets a break and the illusion is maintained that the demand for lavish penthouses and condos hasn’t slipped at all since the golden days of the 2010s.
Yet, by some measures, prices are also down, and down significantly.
The median downtown condo price for run-of-the-mill condos actually rose to $1,050,000, or an increase of more than 4 percent, according to the Elliman report.
However, when measured by average price, downtown Boston condo prices fell by more than 6 percent in the first quarter compared to the same period in 2023, to a little over $1.5 million, according to the report.
Meanwhile, the median price of luxury condos, those at the top 10 percent of the market, plunged by nearly 14 percent year-over-year to just over $4 million.
And the average sale price of these high-end condos was down by close to 22 percent on the same basis, to $4.8 million, the report found.
Overall, the Back Bay and the West End took the biggest price hits. The average condo price in the Back Bay declined by more than 15 percent, to $1.5 million, while in the West End it fell by more than 10 percent.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
