Here's the latest installment of Bates By the Numbers, a weekly feature by broker David Bates that drills down into the Hub's housing market to uncover those trends you would not otherwise see.
What is the surcharge you are paying for real estate safety? Considering the incredibly tragic events of the past week and a half, you might want to think about it.
Did you buy a little less in a neighborhood that you considered safe, when you could have purchased more in a neighborhood you deemed not as safe?
Did you pay a little more to live on an upper floor because you perceived that lower floors were easier to break into?
Did you choose the doorman building with the higher condo fee because it seemed safer?
Heck, did you take the 30-year mortgage with the higher interest rate instead of the 5-year adjustable-rate mortgage (ARM) ? just to be safe, just in case you ended up staying in the condo longer than you thought?
Although, never promoted and rarely ever even openly discussed, the safety question comes up all the time in real estate. So much so that if I had a nickel for every time a prospective buyer, after seeing an interesting property, looked at the location, raised an eyebrow and asked his or her agent, "Is it safe?," I'd probably be living in a beachfront property in the Caribbean, a retired gazillionaire. And in terms of search criteria and property selection, safety can definitely seal the deal. Conversely, the perceived lack of safety can also stop a potential offer in its tracks. Can there be any doubt that safety is one of the most important features in many residential real estate transactions?
Safety. We all want it, but in real estate there's a cost associated with it. What's the price of real estate safety in Boston? Frankly, it's hard to gauge. So many factors contribute to value. Safety is only one of the many benefits you get from location, floor level, building amenities, and mortgage. But in this week where we all feel a little unsafe, let's indulge and use safety as the lens when considering the following:
· Condominiums in neighborhoods considered not so safe might run a few hundred thou. Condominiums in the areas considered the safest could run a few mil.
· Boston condominiums located on lower levels recently sold at a median price of about $400 a square foot. The median for condos on the second floor and above was around $520 a square foot, about 30 percent more.
· The median condo fee for recent Boston sales was around $290. The median condo fee for a unit which noted "concierge" in its remarks section was around $900, more than three times the typical fee.
· In today's market, a buyer might have the choice to pay 2.9 percent for a 5-year ARM or 3.65 percent for a 30-year fixed. Assuming a loan of $300K and moving after five years, the safe fixed rate costs over $10K more than the ARM.
Even if the safety component represents only 10 percent of the difference in costs, can there be any doubt that there is an extraordinary additional cost consumers pay for safety? Yet, if you think safety is costly, try paying the price for not being safe.
· Our Bates By the Numbers archive [Curbed Boston]