Northeast Real Estate Market Sees Recovery Under Way
The Northeast residential real estate market is enjoying a resurgence, thanks to low prices and even lower interest rates, but the sectors experiencing the biggest boosts vary by metropolitan area, according to industry experts.
While the entry-level homebuyers market is making a comeback in Boston, high-end luxury properties are once again the object of bidding wars in New York, with demand outpacing supply for the first time in five years.
When it comes to the Big Apple’s housing market, it’s starting to feel like old times, according to Pamela Liebman, president and CEO of The Corcoran Group.
“If buyer demand is a clear indication of market strength, then the Manhattan housing market is definitely in recovery and some could say experiencing a highly robust return,” Liebman says. “Marketwide, Manhattan residential sales transactions have risen 60 percent since the bottom of the market in the first quarter 2009. Prices, which declined approximately 20 percent in first quarter 2009, stabilized quickly and are now increasing incrementally.”
Liebman says she has not seen a market like this since 2007. She attributes the comeback to foreign buyers who find Manhattan’s properties highly attractive as a safe haven for investing assets and diversifying portfolios.
“Foreign buyers are back in force after a period of diminished buying activity in the Manhattan market,” she says. “Buyers from China, Russia, South America and the Middle East are busy shopping for Manhattan real estate."
“The biggest challenge is a lack of inventory, with buyers snapping up quality product. We have returned to an era of bidding wars with properties selling quickly and transactions going into contract in as fast as one week’s time.”
Liebman says the “go-to” building for high net worth international buyers is One57. Located at 157 W. 57th St., the tall, glass residential condominium tower was designed by Christian de Portzamparc and is being built by Extell Property Development.
“Twenty-million is the new $10 million and $40 million is the new $30 million,” Liebman insists. “The Manhattan market is not in recovery, it's ready to run a marathon.”
It’s a different story in Boston, where first-time buyers are taking advantage of affordable prices and falling interest rates to kiss the days of paying steep rents goodbye.
Mark Pearlstein, owner of Boston-based Metro Realty, says the combination represents “a once-in-a lifetime buying opportunity” for those handing over checks to a landlord in the third-most-expensive rental market in the nation.
“My advice to all my clients and customers is ‘you’re not going to see this again,’” he says. “If you take a look at it, as long as you’ve got a down payment and you feel you’ve got a stable job, why rent? Rents are going up and up and up. Let’s think about buying."
The broker, with more than 25 years of experience, says prices have increased in the prime markets: Cambridge, Brookline, Somerville and Newton.
“Because of its size, Boston, especially the prime locations inside of Route 128, is always one of the first cities to begin the recovery nationwide,” Pearlstein says.
Homes in Cambridge have appreciated as much as 10 percent over the past six years, while Brookline properties are up six percent in value over the same period.
Pearlstein says because of abundance of hospitals and universities, the area is practically “recession-proof,” and the current lack of foreclosures doesn’t hurt either.
While he says the luxury-home market has started to stabilize, it hasn’t improved as much as the mid-range market.
For Brookline and Cambridge that represents a home priced between $700,000-$800,000. In a town like Weston, where the median price is $1.1 million, the market has come down, Pearlstein says.
“This is really the first time we are seeing multiple offers on properties like back to the old days, back to 2005, for the first-time to mid-range luxury market,” he says.
Though he’s optimist that the upswing will continue, Pearlstein anticipates “a whole slew of foreclosures” coming up that could impede the recovery.
“The amount of foreclosures that will be coming up in the next 12 to 18 months will not allow the market to make any exponential improvement,” he says. “Even these hot towns are affected by the foreclosures, that, or even if these interest rates creep up a bit. But the good news is the job market is improving. Companies are moving here and those companies are hiring and in Boston, there’s only so much land. You can’t make any more of it.”
Fairfield County, Conn.
Paul E. Breunich, president and chief executive officer of William Pitt Sotheby's International Realtyand Litchfield Hills Sotheby's International Realty in Connecticut, says it’s too soon to tell if a recovery is under way in ex-urban Fairfield County, but it looks promising.
Breunich notes that while year-to-date closed sales (sales that were contracted in fourth quarter of 2011) are down 15 percent when compared to last year for the same period, there is some positive news.
“The key leading indicator is the ‘under contract’ transactions (deals that will close in the future) that have taken place year-to-date when compared to the same period last year. That number is up 47 percent. New listings taken are up 19 percent year-to-date when compared to last year,” he says.
New home sales are still struggling, with under-contract transactions down 54 percent when compared to the same period last year. The luxury home market, consisting of properties valued at at least $1.5 million, continues to stabilize. Year-to-date under contract transactions are up 4 percent when compared with the period last year and new listings taken are up 14 percent, according the Greater Fairfield County Multiple Listing Service.
Much like Boston, the entry-level market, with homes priced at less than $500,000, is seeing the strongest comeback. Year-to-date under contacts are up 97 percent compared to the year-ago period, and new listings have seen a 20 percent increase.
“The recovery is starting to edge up through all price categories of existing single family homes,” Breunich says.
So whether you’re filthy rich or just starting out, now may be the time to take advantage of buying opportunities in the Northeast real estate market.