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Boston Bubble Brief: The Real Story for MA - November 2006

 
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PostPosted: Sat Dec 30, 2006 1:49 am GMT    Post subject: Boston Bubble Brief: The Real Story for MA - November 2006 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. Reports are based on the published data of the Massachusetts Association of Realtors.

The Massachusetts Association of Realtors released their data for November 2006 on Thursday, December 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:

Full Price History




Change in Median Price From One Year Earlier, February 2004 - November 2006

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




Some observations:

  • The real decline from November 2005 to November 2006 was 6.10%.
  • Prices are now 12.67% below the peak set in June 2005.
  • After two months of slowing declines, the decline began to deepen again in November.
  • Inflation was negative for the third straight month, helping to mute the real price decline.
  • The 12 month moving average for year over year appreciation is well over 1 standard deviation below 0%, indicating that price declines are the norm. Price "stabilization" would be considered abnormal using this metric.

The 12 month moving average with accompanying 12 month moving standard deviations are new additions this month. They are meant to help filter out some of the month to month noise and hopefully indicate when price movements are worth paying attention to. They also provide evidence when weighing the validity of statements from industry groups claiming that prices have stabilized.

As in previous months, The Warren Group reported greater declines than The Massachusetts Association of Realtors. The Warren Group reported declines on equivalent transactions of 6.5%, with the median price falling from $337,000 in November 2005 to $315,000 in November 2006. This translates to a real decline of 8.70%. The Warren Group's data is more comprehensive than the Massachusetts Association of Realtors' data as it includes all sales rather than just Realtor affiliated MLS sales.

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

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PostPosted: Sat Dec 30, 2006 2:08 am GMT    Post subject: Additional note Reply with quote

As an additional observation, the running average is actually over two full standard deviations below 0, as is the year over year change for November. The 12 month running standard deviation for November 2006 was 2.47%. I had just eyeballed the graph earlier when noting that it was over 1 standard deviation below flat appreciation, but staring at the gap a little longer prompted me to go back and check the actual numbers since it looked like it may have been more substantial than my original wording implied (and it was).

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