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[admin]

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 2010 on Wednesday, 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 2010

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



Some observations:

• The real increase from March 2009 to March 2010 was 7.04%.
  
• This was the fourth real year over year increase since August 2005, with all such increases occurring consecutively and after the most recent renewal and expansion of the home buyer tax credit.
  
• The year over year change rose to more than one standard deviation above the moving average after having been within the normal range last month.
  
• Real prices are still lower than the same month in every year in the time period covered by The MAR, with the exception of 2008.
  
• Prices are now 33.75% below the peak set in June 2005. This is the result of a 25.08% decline in nominal housing prices and a 11.57% decline in the purchasing power of the dollar.
  
• The cumulative price decline from the beginning (Feb 2003) is 17.79%, which is an annualized decline of 2.73%.
  

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:

• http://www.bls.gov/cpi/
  
• http://www.marealtor.com/content/housing_data.htm
  
• http://www.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

- admin

[GenXer]

[admin]

[Teavo]

Admin, thanks as always for the excellent info.

I wonder if we'll see a spike upward next month (April data) possibly reflecting the mini-panic of buyers trying to qualify at the last moment for the just-expired tax break, possibly then followed in May by a significant drop as we hit the void from which the buyers had been shifted forward due to the tax break.

[admin]

[Kaidran]

I heard that there was some confusion if the 30th deadline applied to P&S or the initial offer. Does anyone know if there was anything official decided?

Thanks for the numbers btw, very useful as always.

[admin]

[JCK]

Acceptance of the initial offer by a seller creates a binding contract.

You may have contingencies in your offer letter (e.g., inspection, financing), but the contract is legally enforceable.

[Kaidran]

Makes sense.

I think the actual link to the news article I heard is in the News section. The confusion was because different states have only a single contract. I think one realtor was advising to get the P&S done before the 30th.

All done now anyway

http://www.bostonbubble.com/forums/viewtopic.php?t=2755

[GenXer]

[admin]

[GenXer]

Actually, the LESS bias, the LESS one is hypothetically able to profit, based on 'classical' theory. That is, markets are efficient. If markets are not efficient, it has been shown that even if you have a lot of bias in the markets, you can still NOT profit from it consistently. This is simply owing to the chaotic nature of the markets - bias shows up as huge unpredictable movements. You can see they are happening, but it is impossible to profit because nobody can time them exactly, and consistently. Damned if you do, damned if you don't. This is why its actually irrelevant what the 'theory' says - markets have torn apart all theories, large and small. The only theory I believe in is that whether biased or not, markets are not predictable. Thus, even if there is a lot of bias in the futures (which is what I'm arguing), it doesn't matter much as far as predictability (or how right the market is, so to speak). Market can be wrong all the time - the chaos of having many millions of players reacting to different events means just that - chaos.

So in a way, we are arguing about something that's not very useful - how many demons can sit on the edge of a pin, pretty much. One thing is for sure - market players make bets, and the ticker moves, sometimes mildly, sometimes chaotically, and sometimes the market by mere chance happens to be 'right'. Everything else is a conjecture.

[admin]

[GenXer]

[admin]