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 - Jul 2008

 
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 Aug 29, 2008 12:43 am GMT    Post subject: Boston Bubble Brief: The Real Story for MA - Jul 2008 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 July 2008 on Tuesday, August 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 - July 2008

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



Some observations:

  • The real decline from July 2007 to July 2008 was 15.53%, a new all time record which shattered the previous record of 12.90%.
  • Current prices are once again lower than the same month in any other year in the time period covered by The MAR.
  • The median price has fallen below the estimate for the same month in 2002, for the first time this year.
  • Prices are now 23.20% below the peak set in June 2005. This is the result of a 12.64% decline in nominal housing prices and a 12.09% decline in the purchasing power of the dollar.
  • The cumulative price decline from the beginning (Feb 2003) is 4.69%, which is an annualized decline of 0.88%.
  • The year over year decline was below the bottom of the normal range in July for the ninth month in a row. Declines have been in the process of deepening.


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 2008 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=1357 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=1357

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
Brian C
Guest





PostPosted: Fri Aug 29, 2008 12:58 pm GMT    Post subject: Reply with quote

Must be frustrating adjusting the Median Price Change chart every month now? Wink

Looking at SFH Median Chart, seasonally next month is the start of the deep declines in prices. Starting in July and ending in December it looks like prices drop about $30-40k. Does it seem possible we hit $300k over the winter?
Back to top
admin
Site Admin


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

PostPosted: Fri Aug 29, 2008 1:25 pm GMT    Post subject: Reply with quote

Brian C wrote:
Must be frustrating adjusting the Median Price Change chart every month now? Wink

Looking at SFH Median Chart, seasonally next month is the start of the deep declines in prices. Starting in July and ending in December it looks like prices drop about $30-40k. Does it seem possible we hit $300k over the winter?


Sure, it's possible, but the futures aren't calling for that great of a decline. If you extend the June median from The MAR using The S&P/Case-Shiller Boston futures, it yields a nominal median for December 2008 of $318K. Many of the other futures contracts put the price very close to $300K later on, but not below it. Bear in mind that the chart above is adjusted for inflation, so there probably is a good chance that we will dip below $300K at some point in July 2008 dollars even if we don't do so in current dollars.

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





PostPosted: Fri Aug 29, 2008 1:37 pm GMT    Post subject: Reply with quote

Judging by the trends on the chart, it appears that within a few months the median price will drop below that of the (estimated) 2001 levels. Wow, the clock has already been turned back six years and it's soon to be seven.
Back to top
Teavo
Guest





PostPosted: Fri Aug 29, 2008 1:39 pm GMT    Post subject: Reply with quote

Admin - do you think you could add estimated prices for 2000 to your chart? If things keep sinking, you may have to pretty soon! Wink
Back to top
admin
Site Admin


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

PostPosted: Fri Aug 29, 2008 2:05 pm GMT    Post subject: Reply with quote

Teavo wrote:
Admin - do you think you could add estimated prices for 2000 to your chart? If things keep sinking, you may have to pretty soon! Wink


Sure, I'll do it as soon as the median dips below 2001.

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



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Fri Aug 29, 2008 7:03 pm GMT    Post subject: Reply with quote

How much impact do you think the spike in inflation had?
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Fri Aug 29, 2008 7:33 pm GMT    Post subject: Reply with quote

http://www.bls.gov/news.release/cpi.t03.htm

Am I reading this right? The increase in inflation (CPI-U NorthEast) from July 2007 to July 2008 is equal to 5.7%?
Back to top
View user's profile Send private message
admin
Site Admin


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

PostPosted: Sat Aug 30, 2008 1:04 pm GMT    Post subject: Reply with quote

john p wrote:
http://www.bls.gov/news.release/cpi.t03.htm

Am I reading this right? The increase in inflation (CPI-U NorthEast) from July 2007 to July 2008 is equal to 5.7%?


Yes, that's correct. Inflation was 5.7% and the decline in nominal prices was 10.74% (still a record). This isn't how I did it, but you can combine the percentages to get the real decline like this:

(1-0.1074) / (1+0.0568) - 1 = 15.53%

- 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