Contrary to News Reports, Boston Luxury Market Remains Strong

By Larry Rideout

Recent news articles are celebrating Boston’s thriving luxury real estate market (“Hub’s Condo Market Enjoys Life of Luxury” in Banker and Tradesman and “Finding a windfall in their walls” in the Boston Globe). This may seem inconsistent with the “Chicken Little” syndrome in the media for the last 18 months. You might wonder how the sky could be falling while the luxury market is booming. There are a few reasons for this phenomenon:

1. The sky isn’t falling… in Boston – While much of the nation has seen a major market correction, Boston has remained strong. My real estate colleagues in beleaguered markets like Las Vegas and Miami have battled falling prices and rising inventory levels. By contrast, Boston and Manhattan have experienced a relatively small correction. For the months of January-October, there was a 27% increase over 2006 in homes sold for $1 million or more. There was a 17% increase in homes sold at all price points. (Source: Boston’s MLS for Back Bay, Bay Village, Beacon Hill, Leather District, Midtown, North End, South End, Waterfront).

2. Boston was less affected by the recent drama in the mortgage industry – The national media rallied around horror stories of 13% mortgage interest rates and a shocking increase in foreclosures. However, the most dramatic hikes and salacious stories took place in California; a state that has been historically less stable than the New England states.

3. The luxury buyer is unaffected by recent changes in the mortgage industry – Many luxury buyers do not utilize loans to purchase homes. Some are cash buyers or are utilizing the 1031 exchange process.

4. The falling dollar makes this market more attractive to foreign investors – One UK pound buys $2 and one Euro buys $1.50. This means a higher value of investment for foreign buyers. Local real estate companies with global ties are seeing a rise in the number of international buyers for properties in major metro markets, like Boston.

The good news for Boston homeowners is that our properties continue to be desirable to buyers and investors, alike. Invest in Boston with confidence – after all, the city has earned it!

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Larry Rideout is the CEO and Owner of Gibson Sotheby’s International Realty in Boston. Mr. Rideout has more than 20 years of experience in real estate, including 15 years with the nation’s largest real estate firm, as Senior Vice President of Realogy. Contact him at Larry.Rideout@SothebysRealty.com or his website http://www.gibsonsothebysrealty.com/ .