Renovation Road, Construction Hill?

Did I miss a memo?

Every day, on my way to and from the office, I drive down Dean Road between Beacon Street and Chestnut Hill Avenue. Recently a few houses have had little signs popping up on the front yards. Always one to see if these happen to be new listings I have closely followed the changes. These are not For Sale signs, though. It seems that all of the neighbors in this lovely Fisher Hill neighborhood have decided that it was time to renovate their homes all at once. Now, in some of them (including my favorite looking house in Brookline) the renovations seem to be confined to the inside. That being said, in many of the houses it looks like there is a major interior and exterior gut renovation.

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For those who don't know the Fisher Hill neighborhood well, it's a very high-end property value center that is in the area between Beacon Street(Washington Square - Cleveland Circle), Chestnut Hill Avenue and Route 9 (Boylston Street). This is not the area of Fisher Hill embroiled in the Mormon Church debate, but something seems to be going on in this lovely area of Brookline.

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AP poll: More avoid buying homes.

AP poll: More avoid buying homes - Boston.com

In the article from the link above we are seeing that the general public is responding to the media stories about the "downturn." We all know that the most basic economic principle is supply and demand. So, how does this consumer sentiment apply to the Brookline housing market?

We need to first look at one of the major elements of the "boom" of the past 3-5 years. While we know single family home sales have always remained strong and will continue to drive the Brookline housing market to newer heights, condominiums are the "bread and butter" of our market. Most Brookline residents cannot afford to live in the "average" $1.3 million dollar home. It is why we see almost ten times more condos sold in Brookline each year. So, the real estate "volume" is tied up in the condo market here in Brookline. One thing that has changed since 2003 is many multi family homes that used to be rental apartments were purchased by budding "developers" who converted the apartments into condominiums. To be clear, an apartment is a unit in a building but a condo is a deeded living space within an association. So, for the five years that saw incredible growth in the housing market, these apartments started disappearing from the marketplace. Then, in 2004 three very large buildings that traditionally were rental apartment buildings converted to condominiums. First was the conversion of both 1450-1454 Beacon Street (The Warwick) and that was soon followed by 1600 Beacon Street (Washington on the Square). Later in 2004 20 Chapel Street (Longwood Towers) was also converted, removing in total more than 1000 rental apartments from the Brookline market. This sent rental supply plummeting and left renters with little choice but to use a very easy path to mortgages to buy these units as condos.

These events caused rents to increase (supply and demand) and actually most likely contributed to 2006 having a slightly weaker pricing in condo sales. Then, as we moved into the "bubble" talk of mid-2007 we saw many potential buyers start to investigate renting again. As the AP story indicates, many people see this as the "better" path in this market. The problem in Brookline is the rental inventory is still pretty dry. We cannot build any more rental apartments, so where are these renters going to go? All of a sudden the mortgage market isn't allowing the traditional "first time home buyer" to obtain financing as they could two years ago and now rents for a 2 bed apartment are hovering around $2000 a month (in many cases without parking). Enter what looks to be a brilliant stroke by big developers in The Fenway. These new buildings (Trilogy, etc...) might be where all of these people who bought the sub-$400,000 condos in Brookline in the past are going to move to.

This is something worth watching because as a result of the lending environment of the past these traditionally more "transient" homeowners will have less equity in their homes (if any) and will need to sell in the next year or two. Suddenly these homeowners might find themselves being landlords because they cannot afford to sell. The good news for them is if they can manage holding their property and renting it out, there still should be strong rental demand, but these new mega-buildings along Boylston St near Fenway Park will soften that market a little (all shiny and new). As I've been saying all along, the "core" of the Brookline homeowners should weather this market adjustment just fine. Those with 20%+ equity and strong buying power will not notice much of a change. It is this sub-$400,000 market that will most mirror what we're hearing from the rest of the country.

Leading Real Estate Compaines?

Yesterday I got a lovely piece in the mail from a small boutique real estate office in Brookline Village in which they claim that their network has 31% of the national sales volume. They show my firm, William Raveis, as being part of the "other" with an unquantifiable small piece of their pie chart. Guess what, owner of the small office, your ad is misleading. You and I are part of the same network. Not only does William Raveis share the designation of being part of the "Leading Real Estate Companies of the World" but we also happen to have a significantly better regional and local market share than your office.

On another note, I interviewed with the Board of Selectmen for appointment to the Zoning Board of Appeals. A lot of Brookline residents are aware of significant controversy surrounding the ZBA recently. Five members resigned and ten of us have been interviewed over the past two weeks to take their place. I tried to demonstrate to the board that I hope to bring the perspective of a citizen to the board. Whereas every other candidate was an attorney or architect, I pointed out that none of them know as much about the Brookline housing supply as I do. If appointed, I hope to bring a neighborhood voice to the Board. I truly feel that our homes or investment properties are the largest single investment we will ever make. People in the community care deeply about ZBA decisions because they are the single largest outside factor that could negatively impact our neighborhoods permanently.

In this "difficult" market it is going to be more critical than ever for homeowners and developers to improve or add onto their properties to get any financial gain from them. Since Brookline hasn't created any additional land and won't be able to in the future, many of the homeowners needing to improve on their property will need special permits or variances. It is crucial that the town find some way to promote improvement and development. While development must not go unchecked, it is very important that the people willing to improve the quality of property in our neighborhoods are allowed to do so. Gone for now are the days in which living in your property will make you thousands upon thousands of dollars without doing any work to improve the property.

We shall see how the Board votes on the vacancies. I would expect as many attorneys and architects to be appointed as possible, but I will say that I was one of the few people there out of my own free will. I was not "recruited" and remain excited about the prospects of being able to serve my community.

Bringing Down the House (Again)

Front page article in today's TAB about how a Newton developer wants to tear down three properties in "North Brookline." This is my neighborhood, so I take a strong interest in following these stories. The article references two key points in my mind. Also, see my earlier post.

1) This developer has a track record in Brookline when it comes to these projects.

2) My neighbors want to impose a historic district on our neighborhood so we can create our own review committee.

On the first point, I have been in the most recent Brookline work by this developer and I have to say, while the exterior seemed decent enough, I felt like he was making the same house over and over again with "nice" finishes but nothing special. Also, the layouts as I saw them were not as well thought out as they could be leaving me to prefer projects like the 99 Winchester development.

On the second, and much more important and interesting, point, I am all for it. Tell me where I can sign up! Don't get me wrong here, I am all for responsible development. Any time we can take a house that is in complete disrepair and turn it into a neighborhood gem it becomes an extreme benefit to us all. However, looking down my street (Winchester) and seeing super-modern exterior condo buildings on top of classic old Victorian houses upsets me. I know of one group of developers who are currently lying in wait to get the house next to them so they can tear down three houses in a row and build a massive development. Developers all impact most of our lives, whether we like them or not. I look at the buyer clients I see who want stainless kitchens, upgraded baths, parking garages, etc... and I know that they will most likely find them in a property that has been improved by a professional developer.

The project we represented on Atherton Road last year is proof of this. The developer took a completely run down house where the whole front portion was sinking into the ground, totally renovated it into amazingly beautiful condos and helped turn around that part of the neighborhood. As a show of thanks to his immediate neighbors, he also paved their driveways and parking areas for them.

My consistent theme when talking about these projects is to encourage the developer and his agent to get out and meet with the community to let everyone feel involved in the project. Being a successful developer is a lot like being a politician and you need to be great at public relations. It is the charismatic people who do well in this world, and I encourage the parties involved in this to start getting together and talking. Good, responsible development is needed to sustain EVERY neighborhood. Bad, irresponsible development is the easiest way to kill a neighborhood. It's a fine line, and maybe we need a committee to discuss it. Hildy Grossman, you know where to find me!