Scott Denne

The price of houses in Boston has stopped swelling like a twisted ankle; however, the promises of a “bursting” housing bubble were just wrong, experts say. Although the rapid appreciation in value has stopped, don’t expect a decline in price.

Most people in The Oyster income bracket probably don’t have illusions about buying a single family home in Boston. Condos are cheaper, but even condo prices are frighteningly high.

The key to finding a place you can live with -- and sort of realistically pay for -- is, of course, location. There are no bargains in chic neighborhoods.

“You want to ride the wave of gentrification,” said Ben Kendall, of Somerville, who recently purchased a condo near Union Square.

Love it or hate it, gentrification is the result of people finding neighborhoods they can afford to buy into. Neighborhoods that haven’t had a facelift; that still have drafty apartments with crumbling plaster and the smell of cats and cabbage soup. The experts call areas like this “emerging markets.”

So where are these diamonds in the rough? Michael Carucci, president and CEO of ERA Boston Real Estate Group, suggests you try Eastie.

“The area is very affordable. If I was a young newlywed and looking to buy a condo, I would certainly look in East Boston.”

But don’t expect it to be affordable forever.

“The problem with an emerging area, like East Boston, is that when word gets out then owners start pricing properties in emerging dollars,” said Carucci. Meaning that they can price property at what it will be worth in a couple of years, and just wait until they get it. Look at Southie -- condos went from affordable to trendy and overpriced in the last couple of years.

Home sales are down 21 percent from last January to this January, according to the Massachusetts Association of Realtors. And that's the lowest number of January home sales in the state in the last ten years.

“The market has been overheating and is now cooling down,” said Gautham Iyer, regional economist with Global Insight, an economic consulting firm in Waltham. According to Iyer, this decline will not be dramatic. “There is still a very high demand, and the limited amount of land in the Boston area will help prices remain steady.”

Global Insight predicts that the median home price in Massachusetts will decrease by 1.8 percent, or $6,000, by the end of 2006. Any decline is good for potential buyers, but $6,000 might not be enough to tip the scales for buyers trying to scrape together a down payment.

There were 48 percent more condos on the market in 2005 than there were in 2004, according to the Massachusetts Association of Realtors.

“What you have now is more of a selection and less urgency to buy,” said Carucci. Rather than try to predict the next dip in the market, buyers should use the available selection to their advantage. It’s better to take the time to find a motivated seller, he said.

Right now it’s a buyers market. But as soon as you sign the papers, the tables turn, and you are an owner. The market immediately favors the other guy.

“Don’t be buying if you expect a 20 percent appreciation in value, and you plan on moving out in a year,” said Carucci.

When you buy you should be in it for the long haul, he said, or else after paying closing costs and other expenses associated with buying a new condo, you will lose money.

The days when it was possible to buy a condo and sell it in a couple of years for a quick profit are over in Boston. For now.

Scott Denne can be reached at sdenne@theoysteronline.com

03/22/2006   |   Permalink