Condo Sales Volume In Boston Falls 34%, Sixth Straight Quarter Of Slowdown

The condo sales market in Boston has been cooling for the last 18 months after the pandemic-fueled boom, and new data shows just how slow the market has become. 

In the second quarter, 710 condo sales closed in downtown Boston, a 33.6% drop from the same period last year, according to a Douglas Elliman report released Thursday. This represented the sixth consecutive quarter with a year-over-year sales decline. 

Cities across the country have experienced the trend of slowing condo sales since the Federal Reserve began raising interest rates last year, but Miller Samuel CEO Jonathan Miller said the issue is especially pronounced in Boston because the lack of supply on the market is "more extreme than other regions." 

"Sales have been declining over the past year, like in much of the country, because of the spike in rates and the greater economic uncertainty," said Miller, who prepared the Elliman report. "But in this market, a big part of the downturn in sales has been the decline in supply, in listing inventory."

The report defines downtown Boston as a large section of the city consisting of Back Bay, Beacon Hill, Charlestown, Fenway, Midtown, North End, Seaport, South Boston, South End, Waterfront and West End. The inventory last quarter consisted of 538 units, down 12.2% from the second quarter of 2022 and down 23.5% from 2019, according to the report. 

Boston's condo inventory began to fall in early 2022 after the city reached record sales volume in 2021. 

As inventory and transaction volume have slowed, sellers have been able to achieve higher prices. Last quarter's median sale price for downtown Boston condos was up 4% year-over-year, according to the report. 

"The fact that pricing continues to rise shows a greater strength than we see in other markets," Miller said. "Pricing seems to have a fairly firm footing."

Typically, when sales slow and prices rise, inventory will increase as more sellers seek to take advantage of the tight market. But Miller said today's environment has bucked that trend. He attributed that to higher interest rates and economic uncertainty, as homeowners are wary of moving into a new home with a higher mortgage rate when they think a recession may be coming. 

"People are wedded to their 3%, 30-year fixed [mortgages], and combined with uncertainty and a lack of choices, they’re staying put, or more are staying put than you’d normally see," Miller said. "You jump from a low mortgage rate to a high mortgage rate, and so that ends up slowing down the decision. ... Eventually, people will make the move, but it just takes longer to make that decision."

The lack of inventory could be exacerbated by a slowdown in new construction, Miller said. While the new condo projects on the market — such as Fortis Property Group's 168-unit The Parker and the 317 units at MP Boston's Winthrop Center mixed-use tower — were able to secure construction financing when interest rates were low, the spike in rates over the last year has made it harder to start new developments. 

"Financing costs for new development go up, and so that crimps the pipeline for new product, keeping inventory somewhat reduced or challenged over the next few years," Miller said.