Boston Real Estate for Sale

The sky is falling on Boston real estate

Here are the median sales price of condos in the South End for the past five years. I chose May, since that is probably one of the busiest months when it comes to closings; I used March of this year, since it’s the most recent full-month of sales.

5/01/00 – 5/31/00 – median sales price: $329,000, 22 Union Park, #2, 692 square feet, 1-bed, 1-bath
5/01/01 – 5/31/01 – median sales price: $340,000
5/01/02 – 5/31/02 – median sales price: $379,000
5/01/03 – 5/31/03 – median sales price: $400,000
5/01/04 – 5/31/04 – median sales price: $495,000
3/01/05 – 3/31/05 – median sales price: $482,284, 11 Union Park, #6, 761 square feet, 1-bed, 1-bath

Here’s the assessed value information for those 2 properties:

11 Union Park, #6, assessed value, 2000, $199,800, approximate tax bill: $1998
11 Union Park, #6, assessed value, 2005, $359,800, approximate tax bill: $3716

22 Union Park, #2, assessed value, 2000, $155,900, approximate tax bill: $1559
22 Union Park, #2, assessed value, 2005, $299,300, approximate tax bill: $3091

So, what does this all tell me?

First, for this analysis, ignore the differences in the square footage, and consider the two to be equal, in all aspects.

Here’s what I know:

Condo sales prices have increased 46% since 2000.

At the same time, interest rates have gone down.  A 30-year fixed-rate mortgage loan in 2000 might have run you 8%; today it might be 5.35%.  A 5-year ARM might have cost you 7.75%; today it might be 4.75%.

So, using the fixed-rate mortgage loan rates, your monthly payment, with 20% down, in 2000, might have been $1931.  Today, with 20% down, it might be $2154.

Meanwhile, property taxes have gone up about $1500 a year, for each, or $125/month.

Hmm, well, first off, it seems as though things really haven’t been so bad for buyers, since 2000.  The increase in monthly payments after five years is only $200, because interest rates have fallen so much.  (Haven’t salaries increased
at least $200/month, since 2000?)

Property taxes have increased, unfortunately, and significantly.  50% in five years!   (ED. actually, I’m wrong…they’ve increased 100%.)

Here’s the question, though.  People are quoting statistics from the mid-late 1980’s, the last time prices fell.  They say prices went down 30%.  Okay, well, I am highly skeptical of this figure.  First, how many condos were sold in the South End in 1988?  Second, what is the comparison figure based on?  What is the base year?  How are they calculating 30% decrease in price?  Average price?  Median price?  Each of those are important things.

My data seems irrefutable, however.  It’s not twisted to accomplish any results.  These are facts.

So, if we take the worst case scenario (or best case, depending on your point of view), condo prices will fall 30%, if this “bubble” bursts.  In the South End, therefore, a condo selling in March 2005 for $482,284 would end up selling for $337,733 (if I use a cute figure like they did when they sold it last time).

The mortgage loan payment would then be $1885.  That means the monthly payment went down by $269, if interest rates stay constant.

You need to throw in some additional things.  First, there’s no guarantee that the market will go down, at all, and certainly no guarantee it will go down by 10% or 20%, much less 30%.  Further, interest rates may very well increase, quickly.  On the other side, what would you be doing with that 20% down, if you didn’t buy?  If you can invest it and make a return of 4-5%, is that a better use of money today than investing in a property that, as far as you are concerned, will
actually be decreasing in value?  Finally, if you buy now and make payments for five years, after that time you will have approximately $28,000 in equity in the house.

All things to keep in mind if you are thinking of buying, today!

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