Condominium sales way up as prices plummet
For most of Boston, the chill in the housing market has meant a more glacial turnover, especially for condominiums. But in Dorchester's condo market, figures from the Warren Group show a blizzard of sales accompanied by a steep plunge in the median price.
By comparison with the same month for the previous year, the Warren Group reports condo sales in Dorchester this January were up by 45.8 percent, while the median price was down by 69.3 percent. That was the largest drop in median price for any part of Boston with more than a half dozen transactions.
"The inventory in the foreclosure market is just so great now," said the Dorchester office manager for Jack Conway & Co., Julie Simmons. "Investors are coming out of the woodwork that we haven't seen since the 1990s."
Suffolk County records for the past few months show a brisk trade in foreclosed properties. Some buyers have even picked up dozens of properties, with unit prices in multi-family buildings running as low as $33,000. That's roughly one-tenth the cost of some units at the height of the real estate bubble in Dorchester in 2005 and 2006.
According to real estate analyst John Anderson, two-thirds of the units recently sold in Dorchester went for less than $100,000. His figures show that, since the peak of the market, Dorchester condos have lost 72.4 percent of their value. And he says that could be one reason for conventional buyers and sellers to hold off.
"They're just not out there," said Anderson. "They're sitting on the sidelines, looking to see how far down things are going to go."
But, when things go far enough, there are bulk buyers out there.
Records show one corporation has bought 36 properties in Boston since late October of 2008. Most of the units are foreclosed condominiums, and about one-third of them are in Dorchester. The prices per unit are mostly between $60,000 and $85,000.
The owner of Just In Boston Properties, Justin Green, says scattered condos in buildings without active owner associations are selling for low prices because banks are reluctant to provide conventional financing. And he says federally-backed loans are only available currently for buildings with at least four units.
But, over the past few months, some buyers have been consolidating their purchases, acquiring two or three condos in a single building. And Green says that could make the same units easier to finance and resell.
"You can convert that back into a three-family and sell it at a profit," he said. "Or if you can get a condo association up and running, and the units can be financed, you've got yourself a condo that's worth some money."
"Some of the things that are being sold for really low money," said Green, "are really worth more."
To increase chances that foreclosed properties will have new buyers and occupants, the City of Boston will try to acquire some of them directly from companies controlling the mortgage. The city received approval last month for $4.23 million in money for foreclosed properties from the U.S. Department of Housing and Urban Development. The city will also use the money to make the purchase of vacant foreclosed properties more affordable for owner-occupants and for private or non-profit investor owners.
Even more reminiscent of housing rehabilitation programs of the late 1970s is a program being offered by the state. According to Banker & Tradesman, the program will offer buyers of foreclosed properties special financing options and as much as $40,000 for rehabilitation.
But, for developers who do repairs themselves, the incentive is the market. One developer working on property near Fields Corner, Vivian Girard, says purchase prices are low enough to allow unit rentals of $1,000 to $1,300 a month.
"It's largely an investors market for now," he said, because most units at low prices "need a lot of work."
Girard says he and his and his partner, Haitham Hussaini, recently bought a two-family house on Josephine Street for which sales prices had increased from $250,000 in 2000 to $425,000 in late 2006. After foreclosure, Girard says he and Hussaini got the property for $120,000. And Girard says prices like these will attract more buyers who can handle repairs.
"It's starting to make sense with such a low price," he said.
"The nice thing about it," he added, "is for housing to become affordable again."