Eastie's sizzle fizzles
The next 'hot' housing market has cooled, and, for some, that's OK
By Kristen Green, Globe Correspondent | September 23, 2007
Just two years ago, East Boston was the next "it" location. Waterfront access and skyline views, low housing prices and undiscovered status gave the neighborhood, long home to first-generation immigrants and settled ethnic communities, a certain allure with developers and urban pioneers looking to invest in a future hot spot.
Developers snapped up triple-deckers to remodel and flip, and proposed converting factories into high-end condominiums. An enormous waterfront project with luxury units priced up to $2 million was the talk of the neighborhood. In 2005, condo sales jumped 264 percent.
With the community poised to see the construction of more than 1,000 new luxury apartments and condos, many with breathtaking views of the city's Inner Harbor and downtown, something major was happening in East Boston.
"It was on fire. It was going crazy here," said David Barsky, who bought a house in the neighborhood in 2000 and embarked on an eight-unit remodeling project in 2006.
Then, as fast as the boom started, it was over. In 2006, the real estate market statewide softened. As extreme as it was during the boom, East Boston's condo market was way out front during the bust: Sales here fell 30 percent in 2006, compared to a 10 percent decline citywide. And so far this year, condo sales in East Boston are down nearly 18 percent, but are flat citywide.
Once-imminent luxury condos are suddenly on the back burner. Earlier this year, work on the massive East Pier, a 550-unit luxury condominium and apartment complex, stalled just months after it began. The developers now intend to begin building an apartment building this fall, rather than the condos that were initially planned to go first.
Meanwhile, another waterfront development, Clippership Wharf, where 400 condos were proposed, is also going to be built as an apartment complex.
The neighborhood's real estate appeal seemed to fade as fast as it exploded.
"I don't think it's considered the up-and-coming neighborhood that it was anymore," said John A. Keith, who runs the Boston Real Estate Blog.
James Zarrella, a real estate agent for Coldwell Banker who owns more than 80 units in East Boston, said the publicity around waterfront developments such as East Pier helped get people to think differently about East Boston. The upscale project, estimated at $275 million, could usher in other changes common in a gentrifying neighborhood - high-end restaurants, boutiques, and better services, he said.
But with the housing market slowdown, and the stalling of major developments that would have dramatically altered the landscape, East Boston is "where we were five or six years ago. We're in a day-by-day market," Zarrella said. "Not everybody is pounding the neighborhood to get over here and live. There just isn't that demand to be here."
People who recently converted condos are now offering steep discounts or renting them out; in some cases, lenders took over the properties, he said.
Barsky, who estimated he stood to make as much as $1 million restoring a huge Victorian, was unable to complete renovation before the market cooled. He ran out of money, sold it to someone with deeper pockets, and lost $500,000, including his house.
Now he is working with another developer to try to get eight newly constructed condo units on Cottage Street sold before winter hits. He's worried the market could decline even more, and the condos, which were originally going to go on the market for the high $300,000s or low $400,000s, have already been marked down to the low $300,000s.
But to others, the stalling market may have provided a much-needed breather for East Boston, and helped preserve some of the unique flavor of the neighborhood that made it so appealing, including its demographic mix of races and ethnic businesses.
Longtime East Boston realtor Tony Giacalone, owner of Tony's Realty, said the major benefit residents expect from the East Pier project was the waterfront access it would provide. He said he has never heard anyone talking about actually buying a unit in the development.
"A lot of people would be just as happy if that were turned into a park," Giacalone said, contending the projected unit prices are too high for the neighborhood.
He said the boast that East Boston was the next hot neighborhood was "based on hype." But that doesn't mean East Boston is dead. The neighborhood has seen marked improvements in recent years - there are more owner-occupants on every block, and they are spending money fixing up their new homes, filling flowerboxes, and adding other touches that brighten the streetscape, he said. Storefronts are full, creating a vibrant urban village.
"There's a steady, gradual gentrification happening," he said.
He said if the proposed waterfront projects had been priced in the same range as, say, the lofts at Porter 156, a beautifully converted warehouse once home to a bra factory, they would have had better prospects in East Boston.
Keith, who runs the real estate blog, predicted the high-end condo market in East Boston is gone because people in Boston won't relocate across the water. "They're not willing to take a chance on a neighborhood if it doesn't have momentum, if it's not seen as up-and-coming, and they're definitely not going to spend $500,000," he said. But he said that's a positive for people who already live in the neighborhood, because it keeps the community affordable for first-time homebuyers and immigrants.
Indeed, as painful as it is to some sellers and recent buyers, the slowdown has helped preserve something of the old character of East Boston.
There isn't a Starbucks in East Boston yet - though one is projected near Maverick Square, which is dotted with doughnut shops, check-cashing businesses, and taco shops.
Barsky sees East Boston as a place of opportunity, with its vinyl-clad triple-deckers waiting to be restored. Just maybe not until the market recovers.
"East Boston is the last bastion of undervalued property in Boston," he said.
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