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Boston Bubble Brief: The Real Story for MA - Nov 2008

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Joined: 14 Jul 2005
Posts: 1824
Location: Greater Boston

PostPosted: Fri Dec 26, 2008 3:57 pm GMT    Post subject: Boston Bubble Brief: The Real Story for MA - Nov 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 November 2008 on Tuesday, December 23th. 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 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 - November 2008

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

Some observations:

  • The real decline from November 2007 to November 2008 was 15.71%.
  • The year over year decline in November was below the normal range again, after briefly peeking above the bottom of the range in October for the first time in a year. Declines are again in the process of deepening.
  • Real prices are once again lower than the same month in any other year in the time period covered by The MAR.
  • Prices continue to be below the estimate for 2001.
  • Prices are now 31.29% below the peak set in June 2005. This is the result of a 24.28% decline in nominal housing prices and a 9.26% decline in the purchasing power of the dollar.
  • The cumulative price decline from the beginning (Feb 2003) is 14.73%, which is an annualized decline of 2.73%.
  • For the past four months, housing price declines have come amidst general price deflation. The dollar actually gained value in August, September, October, and November on a month over month basis making house price declines less pronounced in real terms.

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 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 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 or 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

The latest version of this report can be found at

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Phil O. Math

PostPosted: Sat Dec 27, 2008 6:28 pm GMT    Post subject: bubble brief Reply with quote

Excellent work, once again. And there is some significant evidence (recasting alt-a and option arms) that this thing is barely halfway through.

How strange is it that I feel lucky that I don't own a house or condo?
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Renting in Mass

Joined: 26 Jun 2008
Posts: 381
Location: In a house I bought in December 2011

PostPosted: Wed Dec 31, 2008 8:13 pm GMT    Post subject: Reply with quote

Thank you!
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