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from today's Boston Globe business section...

Hub condo market cools over record 2004 pace
Sales off 12.3% in the 1st nine months of year
By Kimberly Blanton, Globe Staff | October 22, 2005

Boston's condominium market, which posted record sales in 2004, has slowed dramatically this year, according to a newly published report.

During the first nine months of 2005, sales fell 12.3 percent to 3,132 units, compared with 3,573 sold during the same period in 2004, according to the Listing Information Network, which compiled data for 12 city neighborhoods, from the South End and Fenway to the waterfront and South Boston. That is a sharp turnaround from the comparable time in 2004, when sales rose 32 percent from the prior year.

A separate study of Brookline's condo market by Otis & Ahearn, a Boston brokerage firm, also showed declining sales: 556 units sold in the first nine months of 2005, 11 percent below the year-ago period.

''We're seeing a slowdown across all price ranges -- I don't care whether it's a $300,000 unit or a $3 million unit," said Chris Tuite, a real estate agent for Re/Max Waterfront Realty in the North End. ''I attribute it to too many natural disasters, a quiet stock market, and people are scared about rising interest rates, even though they're still at historic lows."

Sales are slowing as a downtown building boom has pushed new properties onto the market. In the past year or so, large projects such as the 103-unit Atelier 505 in the South End and the 231-unit One Charles development in Park Square have opened.

Many more, such as the 133-unit Gateway Terrace in the South End, are due to open in the next year and are already being sold. At the end of last month, 1,475 condos were for sale downtown, 70 percent more than a year ago.

Adding to this unsold inventory are fewer takers for condos that owners are putting on the market at today's prices. Some real estate brokers said clients have started reducing asking prices after testing the market and realizing it has lost steam, despite tracking data showing prices are continuing to rise.

The median downtown condo price was $462,000 on Sept. 30, up 10 percent in the past year and up 25 percent in two years, Link data showed.

The data can lag the market by several months, since it includes prices only on sales that have closed, and it can take two to three months between the time a purchase-and-sale agreement is signed and the deal closes.

Wellesley College economics professor Karl Case cited ''fundamental reasons" condo demand is dropping, including high prices that make properties less affordable, rising interest rates, and worries about the economy and value of real estate, the single largest asset for millions of Americans.

In the Boston area, Case said condo demand is probably down among baby boomers, who are having a tougher time selling their large, suburban family homes to downsize into condos. Since single-family, suburban sales are slow, he said, ''You have fewer lookers."

Link's president, Debra Taylor Blair, said a condo slowdown could help restore normalcy to the market. ''You can clearly see that the market started to turn in June," she said. The 2004 condo market ''was in a frenzy and really overheated." It ''is really reverting to what we had in 2003, a stable, great, appreciating market."

In a few neighborhoods, Link said, January-to-September sales are still running ahead of a year earlier: Back Bay, Charlestown, the so-called Leather District near South Station, and the Midtown section along the Boston Common. But sales in the three quarters slowed in the South End, South Boston, Beacon Hill, North End, and properties ringing Boston Harbor.

Blair said one reason sales are holding up in Charlestown is because it has more ''properties in all price points. It's still affordable." Citywide, sales seem slowest in units that ''haven't been redone" in Boston's older housing stock, she said. ''There's a lot of demand for new-construction properties with services and amenities."

Asking prices for brownstones and other condos in the South End, Back Bay, and Beacon Hill have dropped, and the prices per square foot of properties that have sold are virtually flat, after increasing early this year, said Dan LaBarre, an agent for R.M. Bradley & Co. ''Properties that come on the market take longer than usual [to sell], months," he said.

But, he added, once the seller drops the asking price by 5 percent to 10 percent, ''then they will sell."