bostonbubble.com Forum Index bostonbubble.com
Boston Bubble - Boston Real Estate Analysis
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

SPONSORED LINKS

Advertise on Boston Bubble
Buyer brokers and motivated
sellers, reach potential buyers.
www.bostonbubble.com

YOUR AD HERE

 
Go to: Boston real estate bubble fact list with references
More Boston Bubble News...
DISCLAIMER: The information provided on this website and in the associated forums comes with ABSOLUTELY NO WARRANTY, expressed or implied. You assume all risk for your own use of the information provided as the accuracy of the information is in no way guaranteed. As always, cross check information that you would deem useful against multiple, reliable, independent resources. The opinions expressed belong to the individual authors and not necessarily to other parties.

Boston Bubble Brief: The Real Story for MA - Dec 2009

 
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond
View previous topic :: View next topic  
Author Message
admin
Site Admin


Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Fri Jan 29, 2010 5:14 pm GMT    Post subject: Boston Bubble Brief: The Real Story for MA - Dec 2009 Reply with quote

This is a brief report on what the data for the housing market in Massachusetts looks like in real terms. Market data is typically reported in nominal terms which can be misleading because it combines changes in housing values with changes in the value of the dollar. Correcting for inflation removes changes in the dollar as a factor and gives a more accurate picture of how housing values have changed. This report is based on the published data of the Massachusetts Association of Realtors, though it should be noted that the S&P/Case-Shiller Index is a superior data source.

The Massachusetts Association of Realtors released their data for December 2009 on Tuesday, January 26th. While the raw prices were provided in nominal terms, for this report they have been adjusted for inflation using the CPI Northeast Urban numbers available at http://www.bls.gov/cpi/ Adjusting for inflation produced the data represented by the graphs below. Prices for January 2003 and earlier have been estimated by applying the earliest reported median from The MAR, February 2003, against the S&P/Case-Shiller Index for the Boston area. Suggestions for improving this estimate are welcome.

Full Price History



Change in Median Price From One Year Earlier, February 2004 - December 2009

Seasonal variations are removed by comparing prices from the same month in the prior year.



Some observations:

  • The real increase from December 2008 to December 2009 was 7.86%.
  • This was the first real year over year increase since August 2005.
  • This was the largest year over year increase since November 2004.
  • Real prices are still lower than the same month in every year in the time period covered by The MAR, with the exception of 2008.
  • Prices are now 27.30% below the peak set in June 2005. This is the result of a 18.39% decline in nominal housing prices and a 10.91% decline in the purchasing power of the dollar.
  • The cumulative price decline from the beginning (Feb 2003) is 9.78%, which is an annualized decline of 1.50%.


The surge in prices in December was exceptional and unexpected. The renewed and expanded home buyer tax credit will undoubtedly continue to distort year over year numbers until government handouts stop increasing, but previously, December would have seemed a likely candidate to be adversely affected by the tax credit. The second renewal and expansion of the credit had been set to expire at the end of November 2009, and it was not renewed until a few weeks before its supposed expiration. This would have 1) encouraged buyers to close before December and 2) not provided much time after the renewal for buyers prodded by the renewal to take advantage of it in time to close by December. However, it is worth remembering that when it was renewed, the credit was expanded to include many people who were disqualified before, and so the surge in demand could be a consequence of those people anticipating the expansion.

It will be very interesting to see how this surge in prices is reflected in the tiered S&P/Case-Shiller Index for Boston next month. Unfortunately, that index lags The MAR's data by a month, so it can't provide any good insights on the December numbers yet. However, it does clearly demonstrate that the so called stabalization of prices in 2009 was driven entirely by the low end of the market, strongly suggesting that any perceived "strength" is merely a result of government life support in the form of the home buyer tax credit and temporary spending to decrease mortgage rates:





The tax credit has since been expanded to also be a handout to high income families, so the boost in price support may no longer be limited to the low tier in the coming months. However, its effect shouldn't be as strongly pronounced there given that the credit will be a smaller percentage of the purchase price in the high tier.

The S&P/Case-Shiller Index for Boston is likely superior to the data above as it corrects for many flaws that are inherent when using only the median price. The S&P/Case-Shiller Index also has the advantage that futures contracts can be traded against it, thereby offering an unbiased insight into where housing prices are expected to be in the future. It also has more extensive historical data available. The MAR data was used for this report mainly out of inertia and might be replaced with the S&P/Case-Shiller Index in future reports.

As usual, please do try this at home. Double checking of the math used to construct the above graphs and analysis is strongly encouraged in order to help ferret out any errors. The data was derived from the following sources:

The text of this post and the associated graphs are Copyright 2010 by bostonbubble.com with all rights reserved, except as stated here. You may reproduce each graph individually or the text of the entire post as a whole (including graphs) under the Creative Commons Attribution-No Derivative Works 3.0 Unported License. You may additionally scale the graphs to fit your work. Alternatively, if you remove the bostonbubble.com signature from the bottom left hand corner of the images within this post, those modified images (and only those modified images) can then be distributed under the Creative Commons Attribution 3.0 Unported License. In all cases, attribution should be made via a hyperlink to http://www.bostonbubble.com/forums/viewtopic.php?t=2544 or http://www.bostonbubble.com/ Quoting excerpts of the text is also allowed provided that the quotes would normally fall under fair use. To request other terms for reproduction, please post your request in the original thread at http://www.bostonbubble.com/forums/viewtopic.php?t=2544

The latest version of this report can be found at http://www.bostonbubble.com/latest.php?id=ma_inflation

- admin
Back to top
View user's profile Send private message Send e-mail Visit poster's website
balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Fri Jan 29, 2010 9:03 pm GMT    Post subject: Reply with quote

Welcome back bubble. We missed you.
Back to top
View user's profile Send private message Send e-mail
admin
Site Admin


Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Sat Jan 30, 2010 6:09 am GMT    Post subject: Reply with quote

balor123 wrote:
Welcome back bubble. We missed you.


Thanks. I'm generally observing, even if I'm not responding.

- admin
Back to top
View user's profile Send private message Send e-mail Visit poster's website
Display posts from previous:   
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond All times are GMT
Page 1 of 1

 
Jump to:  
You can post new topics in this forum
You can reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Forum posts are owned by the original posters.
Forum boards are Copyright 2005 - present, bostonbubble.com.
Privacy policy in effect.
Powered by phpBB © 2001, 2005 phpBB Group