2017 PREDICTIONS: Abundance, Scarcity, with Disruptions

b-w-houses

January 2017

I hope that last year was robust for you and that you’re looking forward to the coming year. 2017 will reward those who are nimble, responsive, and well-informed. The following predictions are mine and based on my observations. I don’t agree with the majority of 2017 predictions that have a rosy forecast. The possibility of significant disruptions in Cambridge and Somerville may affect many real estate decisions.  

  1. This year’s market will be characterized by financial abundance, scarcity of properties, and unexpected and severe disruptions.
  • Buyers will push sales prices higher and the sales market will remain robust across all market segments.
  • Sellers will typically sell because of need, such as a job relocation, yet there will be an increased number of sellers who want and are able to move up.
  • Disruption will include cuts in state and federal funding to cities and towns. Capital improvements, like Somerville’s Green Line Extension, and many social programs will be cut, stopped, or extended. Cities and towns will need to find ways to address significant budget shortfalls. These disruptions, if severe like the GLX postponement, will affect property valuation.
  1. It will be more lucrative for investors to buy, renovate, and sell than to buy and hold.
  • Thousands of new luxury apartments will open this year and it will take significant time for them to be tenanted. The rental market has already been affected with average rents coming declining last year. They will remain stable, though they could dip again.
  • The sales market for single family, condominium, and multi-family properties will continue to set price records due to low inventory and an abundance of buyers.
  1. Buying decisions will typically ­­be based upon duration, ease, and predictability for a daily commute with a location convenient to social exploration and entertainment.
  • The desire to live in or near a city will drive decision-making across demographic boundaries, i.e., everybody.
  1. The various market segments will perform differently this year.
  • There will be a surge of first-time buyers and valuation in this segment will rise. Cities with subways and commuter rail lines will benefit the most.
  • The $2MM+ segment’s rate of rise will slow as more well-located luxury condominiums are constructed in Greater Boston.
  • The rate of rise in for investment properties will slow, although it could rise. Investment properties, often financed via 1031 exchanges, are scarce relative to the abundance of prospective buyers.
  1. Lenders will continue to differentiate themselves by creating innovative niche services.
  • Mortgage rates will remain competitive. Lenders will create unique programs that address particular issues for a segment of those seeking a mortgage. Programs will be unique to that lender and not common to all lenders.

 

Jeff Meese Realtor + Architect, Vice-President, ePlace Real Estate, Cambridge
(857) 998-0600

Should I Wait for the Spring Market?

Cambridge and Somerville clients often ask me when is the best time of year to sell their property and when is the best time to buy one. I ask them what they think, and they often say “Spring” for selling and “Winter” for buying. Is that old, outdated information – like putting one’s listing in a real estate magazine with the belief that it will help sell a property – or is it still relevant? It’s appears that many assumptions that were true in past markets changed after 2008 and that they have changed.

Look at the chart. It indicates a trend showing seasonal variation is flattening out over time. It may be related to less inventory overall, the addition of many foreign investors to the market, or simply because people prefer to buy andsell real estate when it’s convenient for them.

chart

What should a savvy buyer or seller do? Make your decisions when it’s convenient for you. Boston is an international city and there’s constant churn of people moving in, out, up, and down.

Do the old rules still apply? Not so much.

Harvard Square

Found Flexibility in a House near Harvard Square

A couple I worked with purchased a large house in Cambridge’s Marsh Billings Historic District near Harvard Square. Their children had left for college and they decided to relocate to Harvard Square from a nearby suburb. They intended to downsize to a four-bedroom stand-alone house, with off-street parking, and convenient to nearby restaurants, shops, and transportation. She worked overseas in academia and he had a thriving medical practice in a Boston suburb.

I alerted them to tour the a house that met these needs and it had a bonus: an accessory apartment. It was a lovely home, and was in need of substantial renovations. They loved the house, placed a strong bid, and purchased the home. Their intention was to live in the “big” house, and rent out the accessory apartment.

Then, one day after much of the renovation had been completed, they realized that being empty-nesters allowed them the freedom to travel together more frequently. They changed course and decided to live in the apartment, which was very nice in its own right, and lease the house, to provide a substantial rental income. It’s also possible that their situation will change in the future. They know that they have the flexibility to move out of the apartment and into the house at a future date.

Jeff Meese Realtor + Architect

ePlace: http://www.eplacehomes.com

Linked-In: https://www.linkedin.com/pub/jeff-meese/2/a66/545

Facebook: https://www.facebook.com/JeffMeeseRealtor

Kendall Square

Finding Hidden Value in a Kendall Square House

While visiting an open house with a first-time buyer couple in Cambridge’s Kendall Square, we encountered a single-family house with a hidden upside. The listing agent had described the property as a single-family home and that’s what we had expected to see. The seller had effectively created a two-family with a separate apartment in the basement complete with an entrance, kitchen, bathroom, laundry, and bedroom.  As an Architect, I knew that the ceiling height was high enough to be considered a habitable space. Yet, it wasn’t a separate unit as the basement didn’t have a separate second means of egress, and the windows were too small.

The hidden upside was that creating a true 2-family residence, which this couple was attracted to, would cost only $30,000, yet the list price was at least $250,000 less than any comparable 2-family in Cambridge at that time. The house was located in a zoning district http://www.cambridgema.gov/~/media/Files/CDD/Maps/Zoning/cddmap_zoning_base_9600.pdf that allowed 2 and 3-family homes, so converting this single-family residence into a 2-family residence would not require a variance from the zoning code.  What a great value that had the promise of flexible uses! It could be used as a single-family home, a 2-family home with modifications, or even as a 3-family home (a tear-down of the existing, and construction of a new 3-family home).

This couple didn’t realize the hidden value of the property until we left the premises and discussed it privately.   These clients received tangible benefits from my education, training, and experience as an Architect.

Jeff Meese Realtor + Architect

New Construction in Dorchester

Buying new construction is easy for a buyer, isn’t it?

No, it’s not. The finishes and systems have been installed, but not yet operated for a long period of time in many instances. It’s impossible to know if there were problems during the course of construction. Did the electrician hurry for some reason? Did the HVAC sub-contractor install a condensate line? Some of these items show up during a home inspection, but even the best inspection occurs in a limited amount of time and items can be missed. Perhaps the home is still not quite completed at the time of inspection; then what?

So, what’s a buyer to do? She may never see the developer or contractor again. What if something needs to be repaired or replaced?

For one of my buyers, I used my training and experience as an Architect – someone familiar with a “punchlist” –  and went through each room with my client after the developer said the condominium was 100%  complete. We turned on every faucet, turned on every light, and used every device. We even turned on the fireplace even though it was hot! We found several electrical problems – the intercom was connected to the wrong exterior device (there were two townhouses side by side) and, even more seriously, we found that the electro-magnetic front door lock had been mis-installed – so no one could get out the front door!

The items were promptly brought to the attention of the developer and fixed prior to closing. Would all licensed real estate salespersons have done the same thing? The home had already been inspected, yet these items were missed.

Check out my Facebook Business page for more:

Cambridge Somerville Realtor + Architect

Year in Review: 2011

The Year in Review 2011

 

 

HAPPY NEW YEAR! The following qualitative observations are mine and reflect my own experiences and limitations; the quantitative data was found on the Multiple Listing Service (MLS).

 

OVERVIEW The beginning of the year was upbeat as buyers who had returned to the market late in the 4th Quarter of 2010 continued their search for homes through the first half of 2011. I was fortunate to have received multiple referrals resulting in several listings and multiple buyers. Sales were prompt and robust; my work for my clients was recognized by being identified as a “Top 500” agent in New England! The summer was quiet, as it tends to be, and was a good time for me to create a blog presence, have fun, relax a bit, and prepare a more refined online marketing campaign. The post-Labor Day Fall market included a significant decrease in the number of new listings in comparison with 2010. This was true for all property types, but most notably for single family houses in Cambridge. In working with several buyers, we found it difficult to find appropriate properties. We did notice that several “plus” properties (those that fit a full range of my client’s needs) attracted multiple offers and, in some cases, selling prices that exceeded asking prices. As Fall progressed, several buyers decided to postpone their search until Spring 2012, in part because of their concerns about the future direction of property values in the area. At the same time, several clients contacted me to work with them for investment properties. My sense is that those clients who took a longer view have been more apt to actively seek and purchase properties. The holidays, which were active last year, have been busy again! One group of clients had their offer accepted on New Year’s Eve and I’m working with another. It appears that 2012 is off to a promising start. I’m looking forward to more properties becoming available for my buyers as well working with sellers in what has been a reasonably strong, yet value driven, local market.

The lending environment is still very important. One typically needs very good credit and a substantial down payment, though many lenders have programs that can provide alternatives. Interest rates are very favorable and little or no increase is anticipated for the next year, based on comments made by representatives of the Federal Reserve Bank.

The highlight of my architectural endeavors was working towards Planning Board approval for 380 Somerville Avenue in Union Square. Since receiving that approval in July, I have been active with a variety of proposals for residential and commercial clients. This year, I’m looking forward to learning from a series of webinars prepared by the United States Green Building Council (USGBC) on LEED for Homes.

 

CAMBRIDGE 
One hundred and fourteen (114) single-family residences sold for an average price in excess of $1.07M and an average sale price per square foot in excess of $440/psf. There were thirty-nine properties that sold in excess of $1M; fifteen properties sold in excess of $2M; and six properties sold for over $3M. The Total Market Value for single family residences was $122,531,413. The condominium market was active with 709 units sold in 2010 with an average price in excess of $498K. The Total Market Value for condominiums was $354,160,682. Fifty eight (58) multi-family properties sold for an average price in excess of $902K and an average price per square foot of $281/psf. The Total Market Value for multi-family residences was $53,274,912.

The Total Market Value for single family residences, condominiums, and multi-family residences in Cambridge was $529,967,007.

 

Private development included proposals to the Planning Board for for a $600M project by Novartis near MIT as well as a 227-unit residential development that involved the demolition of the “Faces” nightclub (never thought that I would see the day!).

 

SOMERVILLE
Sixty-five (65) single-family residences sold for an average price in excess of $489K and an average sale price per square foot in excess of $264/psf. Two single family properties sold in excess of $1M and eleven sold in excess of $750K. The Total Market Value for single family residences was $31,799,350. Three hundred and forty eight (348) condominiums sold with an average price of $391K and an average sale price per square foot of $326/psf. The Total Market Value for condominiums was $136,208,500. One hundred and sixty (160) multi-family properties sold with an average selling price of $526K and an average price per square foot of $184/psf. The Total Market Value for multi-family residences was $84,590,516.

The Total Market Value for single family residences, condominiums, and multi-family residences in Somerville was $252,598,366.

Notable private development included Planning Board approval for the Residences at 380 Somerville Avenue in Union Square, and the passage of a $25.75M bond for the construction of a T-station at Assembly Square. I worked with ICON architecture, inc. for the design of the thirty-unit USQ project. Richard DiGirolamo was the attorney. The passage of the bond helps the development of the Assembly Row site by the Federal Realty Investment Trust (FRIT). The following link leads to an article that describes the project: http://www.thesomervillenews.com/archives/21039

 


New Development Near MIT

The design of a proposed group of buildings, described in an earlier post, has been presented to Cambridge’s Planning Board. The $600M proposal is located along Massachusetts Avenue near the MIT campus.

Seeing such significant new investment is a positive sign, whether its public, private, commercial or residential . There is a great deal of commercial construction underway in Kendall Square, too.

from ‘The Tech’ Online Edition

http://tech.mit.edu/V131/N58/novartis.html

December 9, 2011

In a