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 Wrap: The Real Story for MA - Aug 2010

 
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: Thu Sep 30, 2010 2:43 pm GMT    Post subject: Boston Bubble Wrap: The Real Story for MA - Aug 2010 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 August 2010 on Tuesday, September 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 - August 2010

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



Some observations:

  • The real increase from August 2009 to August 2010 was 3.30%.
  • This was the ninth 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.
  • 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 and 2009.
  • July and August were the first months that the median has been above the real median for the same month in 2008 since falling below it. The difference was slight in both cases, however.
  • Prices are now 22.25% below the peak set in June 2005. This is the result of a 11.71% decline in nominal housing prices and a 11.94% decline in the purchasing power of the dollar.
  • The cumulative price decline from the beginning (Feb 2003) is 3.51%, which is an annualized decline of 0.48%.

Of note in this month's Massachusetts Association of Realtors report, sales volume for single family homes plunged 18.4% from one year earlier. No doubt this had much to do with the original closing deadline for the most recent home buyer tax credit expansion. While the closing deadline has since been extended to the end of September, it had originally been the end of June, and that extension came late enough to have already stolen sales from future months which are now covered by the extension. On the other hand, the credit will likely also add some sales to what otherwise would have occurred through the end of September as The MAR reported that 47% of members reported that they had at least one client who benefited from the extension, and 18% had at least three clients who benefited. Consequently, the tax credit will probably be distorting the volume data in both directions for the next several months, though it would seem from the precipitous drop that the net effect is downward.

Similarly, price is still being distorted by the credit. It is pushed up by the stragglers taking advantage of the credit, but it is also pushed down by the lower demand resulting from the void left by the time shifted sales. More importantly, the volume was so dramatically lower this month that the median price is probably not a particularly reliable gage at present. The increase in the median could very well be due to fewer low-end homes being sold even while the price on high-end homes stays flat or even declines.

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 2010 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=3062 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=3062

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
FreedomCM
Guest





PostPosted: Thu Sep 30, 2010 5:36 pm GMT    Post subject: Reply with quote

Another excellent analysis!

Do you expect the coming september drop to be as dramatic as 2008 and 2009?
Back to top
admin
Site Admin


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

PostPosted: Fri Oct 01, 2010 1:02 pm GMT    Post subject: Reply with quote

FreedomCM wrote:
Another excellent analysis!

Do you expect the coming september drop to be as dramatic as 2008 and 2009?


Thanks. I have no idea. There are a lot of forces pulling in opposite directions on this. I do expect sales volume to be down a lot again, but that could affect the median either way simply by changing the mix of what is selling.

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


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

PostPosted: Fri Oct 01, 2010 9:31 pm GMT    Post subject: Reply with quote

admin wrote:
FreedomCM wrote:
Another excellent analysis!

Do you expect the coming september drop to be as dramatic as 2008 and 2009?


Thanks. I have no idea. There are a lot of forces pulling in opposite directions on this. I do expect sales volume to be down a lot again, but that could affect the median either way simply by changing the mix of what is selling.

- admin


It's official, sales volume was down a lot again in September, at least in Middlesex County:

http://lowelldeeds.blogspot.com/2010/10/september-recording-statistics.html

- 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