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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 March 2008 on Monday, April 28th. 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 - March 2008

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



Some observations:

• The real decline from March 2007 to March 2008 was 11.90%, which is an all time record for year over year declines.
  
• Current prices are once again lower than the same month in any other year in the time period covered by The MAR.
  
• The cumulative price decline from the beginning (Feb 2003) is 4.96%, which is an annualized decline of 1.00%.
  
• Prices are now 23.42% below the peak set in June 2005. This is the result of a 15.72% decline in nominal housing prices and a 10.05% overall increase in prices for typical goods (i.e., inflation).
  
• The year over year decline was below the bottom of the normal range in March for the fifth month in a row. Declines have been in the process of deepening.
  

One important thing to note which is not reflected in the above data is that the number of homes sold fell a dramatic 32.3% compared to one year earlier.

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 only using 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:

• http://www.bls.gov/cpi/
  
• http://www.marealtor.com/content/monthly_reports.htm
  
• http://www2.standardandpoors.com/ ...truncated...
  

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

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[Phil O. Math]

I'm no rocket surgeon but it looks to me like the price declines are accelerating. I would not predict any imminent rebound with this chart looking the way it does.

Thanks again!

[Guest]

It seems to me we need a longer Y axis, at least for the negative half.

[admin]

[abstract difficulty]

2005 was the last year that December's median price was no lower than the preceding February. More recently December is the lowest price of the year, but if you wait 2 or 3 months until February or March it'll be cheaper still.

These markets are paying people to put off purchasing, more than $3000 a month.

Uh oh, free money! Better get the Fed to squelch that right away.