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Boston Bubble Brief: The Real Story for MA - Jan 2007

 
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admin
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Joined: 14 Jul 2005
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PostPosted: Fri Mar 02, 2007 1:55 pm GMT    Post subject: Boston Bubble Brief: The Real Story for MA - Jan 2007 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 January 2007 on Tuesday, February 27th. 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 - January 2007

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




Some observations:

  • The real decline from January 2006 to January 2007 was 4.61%.
  • Prices are now 13.08% below the peak set in June 2005.
  • This was the lowest January on record using the data set provided.
  • The moving average for year over year declines continues to be well over two (and close to three) standard deviations below 0, firmly indicating that declines are the norm.
  • Year over year declines in recent months have all been relatively close to the moving average, suggesting that the market may be settling into a steady rate of decline.

Yet again, The Warren Group reported greater declines than The Massachusetts Association of Realtors. The Warren Group reported nominal declines on equivalent transactions of 3.4%, with the median price falling from $325,000 in January 2006 to $314,000 in January 2007. This translates to a real decline of 5.42%. 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.

There was one glimmer of optimism (for sellers) in the data for January as the actual number of homes sold increased for the first time in ten months. Oddly, many housing bulls conveniently ignored the warning signs of declining volume when prices were still rising, contending that all signs (mainly rising prices) pointed to a strong market, so promoting this metric now seems expedient. Nevertheless, it is worth paying attention to as a leading indicator. One month hardly makes a trend, though, so this uptick shouldn't be given too much weight prematurely.

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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JCK



Joined: 15 Feb 2007
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PostPosted: Fri Mar 02, 2007 2:22 pm GMT    Post subject: Reply with quote

So it looks like prices have been pretty much steady, in real terms, since September 2006.

Thank you for the update.
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admin
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PostPosted: Fri Mar 02, 2007 2:32 pm GMT    Post subject: Reply with quote

Quote:
So it looks like prices have been pretty much steady, in real terms, since September 2006.


Yes, and I would suggest that seems typical for the season. Many of the other years on the chart are relatively flat between September and January of the following year.

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samchady
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PostPosted: Fri Mar 02, 2007 2:59 pm GMT    Post subject: thanks Reply with quote

Thanks for removing those vertical lines at the endpoints of the graph. I know it looked cool, but overly literal people like me get confused! Cool
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admin
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PostPosted: Fri Mar 02, 2007 3:20 pm GMT    Post subject: Reply with quote

Quote:

Thanks for removing those vertical lines at the endpoints of the graph. I know it looked cool, but overly literal people like me get confused! Cool


I didn't like the lines either, I just couldn't figure out how to get rid of them. I still haven't, in fact - I had to remove them manually by editing the exported image rather than removing them in the spreadsheet. They were bothering me even more than before since you pointed out how they could be confused with the actual data and so I had to get rid of them somehow (though I'd still like to figure out how to do it in the spreadsheet so that producing the graphs is less labor intensive).

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xpaulso
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PostPosted: Sun Mar 04, 2007 5:01 pm GMT    Post subject: Reply with quote

admin wrote:
Quote:

Thanks for removing those vertical lines at the endpoints of the graph. I know it looked cool, but overly literal people like me get confused! Cool


I didn't like the lines either, I just couldn't figure out how to get rid of them. I still haven't, in fact - I had to remove them manually by editing the exported image rather than removing them in the spreadsheet. They were bothering me even more than before since you pointed out how they could be confused with the actual data and so I had to get rid of them somehow (though I'd still like to figure out how to do it in the spreadsheet so that producing the graphs is less labor intensive).

- admin


I wouldn't mind helping with the graphing. We could use something like rrdtool and get a lot more flexibility over the graphs.
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john p



Joined: 10 Mar 2006
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PostPosted: Mon Mar 05, 2007 4:16 pm GMT    Post subject: Reply with quote

Keep in mind the past 6 month trend in interest rates. Think about when these buyers and sellers came to terms for a sale to be recorded by January. When was the offer made/accepted and what was the interest rate doing during that time. You need to go back to the time when that trigger was pulled.

http://www.bankrate.com/... truncated ...

Editor's Note: This post was edited to abbreviate a URL which was widening the page due to the way that the forum software lays out posts. No other changes have been made, and the URL still points to the original destination - only its display has been shortened.
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admin
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PostPosted: Fri Mar 09, 2007 8:17 pm GMT    Post subject: Reply with quote

xpaulso wrote:

I wouldn't mind helping with the graphing. We could use something like rrdtool and get a lot more flexibility over the graphs.


OK, here is the data from the year over year graph in CSV format. Feel free to give it a try in 'rrdtool'.

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