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

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Site Admin

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

PostPosted: Fri Jul 27, 2007 2:57 pm GMT    Post subject: Boston Bubble Brief: The Real Story for MA - Jun 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. 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 June 2007 on Monday, July 23rd, two days ahead of schedule. 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:

Full Price History

Change in Median Price From One Year Earlier, February 2004 - June 2007

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

Some observations:

  • The real decline from June 2006 to June 2007 was 3.79%.
  • Prices are now 9.37% below the peak set in June 2005.
  • As previously discussed, the decline from the peak is particularly relevant this month as it was exactly two years from when the peak was set and so the normal seasonal fluctuations which occur during the year are not present.
  • Prices are below their 2003 levels once again, albeit slightly.
  • The year over year decline in June once again returned to the normal range signaling that an end to the declines would be abnormal and not presaged by recent data.
  • The moving average is over two standard deviations below zero, indicating solid decines.

Yet again, The Warren Group reported greater declines than The Massachusetts Association of Realtors. The Warren Group reported nominal declines on equivalent transactions of 4.8%, with the median price falling from $350,000 in June 2006 to $334,000 in June 2007. (While their press release says that the decline was 4.6%, they may have mistakenly reused the percentage decline from May 2006 - May 2007, which was 4.6% - calculating the percentage decline from $350,000 to $334,00 yields 4.8%.) This translates to a real decline of 6.67%. 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.

The Massachusetts Association of Realtors has been consistently reporting smaller declines than The Warren Group for two years now (and possibly longer). Consequently, the gap between the reported prices has been widening. With a reported June price of $364,000 from the MAR compared to $334,000 from The Warren Group, the MAR price is now 8.98% higher than the more inclusive and therefore probably more relevant Warren Group price. See The Massachusetts Housing Market Blog for a nice graph illustrating the continuing discrepancies.

The S&P/Case-Shiller Index for Boston is likely superior to the data from both The Massachusetts Association of Realtors and The Warren Group as it corrects for many flaws that are inherent when only using 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. 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.

Note that in previous reports the year-over-year graph had its y-axis automatically labeled and some of the axis labels were consequently rounded to be whole numbers. For this month, the y-axis has been manually set so that the grids are spaced exactly 1% apart, so as to avoid any misunderstanding caused by the previous rounding.

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:

The text of this post and the associated graphs are Copyright 2007 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-NoDerivs 2.5 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 two images within this post, those modified images (and only those modified images) can then be distributed under the Creative Commons Attribution 2.5 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

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Phil O. Math

PostPosted: Sat Jul 28, 2007 1:08 pm GMT    Post subject: Comparison Reply with quote

I think you soon might need to add another line on the graph for 2002 median home prices.

Great work.
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Site Admin

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

PostPosted: Sat Jul 28, 2007 2:41 pm GMT    Post subject: Re: Comparison Reply with quote

Phil O. Math wrote:
I think you soon might need to add another line on the graph for 2002 median home prices.

Great work.

Thanks. I would like to add 2002, but the monthly median price reported by the MAR only goes back to 2003. If you can find older, monthly, median data on their site, please post a link here and I'll add it to the future graphs.

This would be another good reason to use the S&P/Case-Shiller Index. It goes back a bit farther than the MAR data.

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john p

Joined: 10 Mar 2006
Posts: 1820

PostPosted: Mon Jul 30, 2007 9:21 pm GMT    Post subject: Reply with quote ...truncated...

2005 to 2006, June to June was a steeper drop than June to June 2006 to 2007.

This spike of June's interest rate will make the doldrums of this summer even slower.

By the end of August, I predict that the Globe will do a piece on the number of transactions that broke down due to contingencies that didn't pan out among other reasons and nervous sellers/buyers that want to get their kids in new school districts etc.

I would like to get an appraiser's assessment (no pun intended). These guys come in and poke around and kick the tires for show but about 99 percent of the time appraise it right at the selling price. I wonder what their bosses are telling these wind up professionals today?

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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