These are uncertain economic times. With a heavily contested presidential election in our recent past, a drawn-out global pandemic and an unusual amount of civic unrest throughout the nation, economics are having a difficult time predicting the real estate market from one month to the next.
As a real estate developer, what do the current trends suggest? Should you buy now or wit for the market to stabilize? What are the current trends in Boston right now? These are important questions to answer before moving forward on a new development.
What are the current trends in Boston?
Although in most areas single home purchases are going up considerably in recent months, the report seems somewhat different for condominiums in Boston. According to the Warren Report by Berkshire Hathaway Home Services, the numbers seem to be down across the board for condominiums in downtown Boston (see pg. 11).
The numbers from the first quarter of this year are down significantly from 2017. Everything from the number of sales to the average sales price and price for foot are all lower than they were four years ago.
What does this mean for condominium developers?
If you are a condominium developer, you are probably wondering what these trends suggest in terms of whether this is a good time to invest.
The answer to this question could lean either way.
On the one hand, a lower market trend could suggest investing now in anticipation for a rebound. Like the stock market, if you buy low and sell high, you increase your profit margin. This theory can hold true in real estate development, as well.
On the other hand, the lower numbers in 2021’s first quarter could suggest more than a dip in the market. It could represent broader uncertainty and real problems in the economy, the kind that do not rebound quickly. If this is the case, it would be a bad time to start a new condominium development.
What should you do?
Of course, these determinations involve more than market analyses. You need to consider your own business plans and capacity to absorb risk. You also need to consider the specific land and neighborhood involved, as well as other related factors.
The best thing to do is talk with an experienced attorney about any possible condominium or other real estate development opportunity you might be considering. In addition to helping you determine the feasibility, risks and rewards, a good lawyer will protect your interests through the entire development process.