Real Estate

New report says Boston’s condo market remains lethargic

The Warren Report says total transactions dropped 20.5% between the first quarter of 2023 and 2024.

By Victor Stefanescu

April 24, 2024

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A new report hints at a Boston condominium market that’s still lethargic amid high mortgage rates and low inventory.

Berkshire Hathaway Homeservices | Warren Residential reported that the condominium transactions total in the first quarter, which stretches from Jan. 1 to March 31, were down by 20.5% compared with the same period last year. Total transactions dropped from 722 in the early months of 2023 to 574 in that time frame this year, according to The Warren Report.

Nick Warren, chief executive and owner of the agency, said that the low number of condominium purchases aren’t just a Boston trend, he said, “We’re seeing that nationwide, with total home sales dropping anywhere between 20 and 30%.”

“And, it’s a combination of things: a combination of a limited amount of inventory, which I’m sure everybody’s talked about before, and rates rising,” Warren said.

The report detailed price and inventory shifts in Boston’s neighborhood real estate markets, although it notes that small sample sizes can cause significant shifts: There were only two transactions in Mattapan and Bay Village, one in Mission Hill, and zero in Roxbury.

During the first quarter of 2020 — before the pandemic jostled the real estate market — there were 865 total condominium transactions in Boston, the report said. A year later, that number spiked to 1,064. Since then, the figure has decreased by 46.1%.

The average condominium sales price increased by 6.1% between the first quarter of 2023 and 2024, the report said, from $1,044,000 to $1,107,828. The shift was more dramatic in Allston, which has historically boasted some of the city’s more affordable housing stock. 

In the Green Line neighborhood, prices have increased from $490,388 to $635,444, according to the report, although it’s important to note that there were only nine transactions there. 

“We have seen a lot of new development happen in the Allston-Brighton area over the last couple years,” Warren said. “So, that’s why you’re seeing some of these average prices go up significantly.”

The number of months it would take agents to sell off Boston’s inventory increased 21.2% between the first quarters in 2023 and 2024, from 2.17 to 2.63 months of supply, according to the report. 

Warren said new inventory isn’t causing this shift. Instead, some condos are sitting on the market longer due to high interest rates and a hot suburban market.

Single-family homes are a more popular choice than condos, Warren said: a trend that stems from the pandemic when prospective home buyers raced away from the city.

“A lot of the first-time home buyers waited a while to buy and almost potentially skipped that condo in the city as the first transaction,” Warren said, because they rented for an extra few years. “And now, [buyers are] kind of just making that jump straight to the suburbs.”

And with interest rates remaining high, Warren said, many would-be sellers are locked in at lower rates, dissuading moves.

“The move-up movers or downsizers are no longer moving, because it would almost be irresponsible of them to give up a rate that’s 2.75% to jump to something that’s 6.5,” Warren said. 

With sellers locked in at these low rates, Warren said he doesn’t think there’s going to be any relief anytime soon. The Federal Reserve chair cautioned that inflation will likely delay interest rate cuts, the Associated Press reported on April 13.

Warren suggested that prospective home buyers prepare for bidding wars. They should also pay attention to neighborhood trends, he said.

“So, don’t sit around waiting for the next five years for rates go to the twos or threes,” Warren said. “That’s not going to happen.”