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Devastating housing crash underway in Boston - condos fetch hundreds of thousands of dollars below asking price

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10/09/2006 10:49 PM
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Devastating housing crash underway in Boston - condos fetch hundreds of thousands of dollars below asking price
[link to business.bostonherald.com]

Condos going, going, cheap: Bidders get great deals on 31 units at Hub auction

By Brett Arends

Boston Herald Business Columnist
Sunday, October 8, 2006

Just how weak is the Boston real estate market?

We got an idea yesterday. And if you’re looking to sell your home in the near future, the news isn’t good.

Brand-new luxury condos downtown saw hundreds of thousands of dollars wiped off their value in the Hub’s first public real estate auction in a decade.

The 31 condos up for sale in the Folio building on Broad Street sold on average for 30 percent below their asking prices.

Some barely fetched their minimums.

Even the building’s marketing boss couldn’t hide what happened.

“I think the buyers got a better value than anybody expected,” Paul Gollinger said after the two-hour auction. “But we’re satisfied, very satisfied... We hadn’t had a sale in the last four months.”

Nearly 400 people crowded into a room at the new Seaport Hotel at lunchtime to watch the sale.

The most expensive properties fell hardest. A $1,760,000 penthouse plunged $600,000 to just $1,140,000.

A $1,600,000 three-bedroom apartment with a terrace crashed by half a million dollars, selling for less than $1.1 million.

Husband and wife Kevin and Daire Starr couldn’t believe their luck. They got a 1,910-square foot apartment with three bedrooms and two bathrooms for $837,000 - almost $400,000 below the list price, and just $12,000 over the auction minimum.

“It was my wife’s birthday this month, and she wanted it,” said Starr. “It was the deal of the auction.”

Starr said the couple currently rented in Back Bay. “We’ve been waiting for the market froth to cool down the last couple of years before we jumped in,” he said with a smile.

Buyer Dennis McCarthy, who got a $480,000 one-bedroom condo for $401,000, said he wasn’t surprised to see prices drop.

“The asking prices were realistic eight months ago,” he said. “But they’re unrealistic now.”

Properties near the bottom of the scale fell by less. Bidding was brisk for two bedroom condos. There were plenty of buyers willing to spend up to $700,000 for a home, paying between $520 and $570 a square foot.

In total, condos listed for nearly $33 million ended up selling for $24 million.

What does this mean for the struggling real estate market overall?

Property experts caution that developer Mike Rauseo’s luxury condo building isn’t typical.

Collinger admitted that the units were too big to fetch the maximum price per square foot in today’s market. Other developers have raised eyebrows over some of the layouts. And the location, on the edge of the Financial District, is not a residential sweet spot.

Yet you can expect the auction to put pressure on the rest of the real estate market. And it may push more sellers to negotiate on price. The buyers are out there for the right deal.

Most of the coverage of the real estate slump ignores the fact that the story is a mixed one. Cheaper home prices are obviously bad news for sellers - but they are, just as obviously, great news for those who need to buy. And that, long-term, is better news for the Massachusetts economy.

We can’t simultaneously worry about home prices falling and then complain about all those leaving the state because they can’t avoid to live here.

The big losers yesterday? The people who paid full price for the other 65 homes in the building during the last few years.

Collinger said the first went up for pre-construction sale four years ago. And they all sold for the asking price.