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This morning, Standard & Poor's released the S&P/Case-Shiller Indexes for October 2010. Prices within the Boston MSA declined 0.23% from one year earlier in nominal terms. Adjusted for inflation via the CPI-NU, the real decline was 1.66%. This was the first month since the closing deadline of the home buyer tax credit and also the first month of nominal year over year declines since prices began rising during the credit. However, year over year declines in Boston actually resumed in September, when adjusted for inflation.

The S&P/Case-Shiller numbers should clarify that recent price increases reported by The MAR and The Warren Group are a statistical artifact and do not correspond to actual price increases. Both The MAR and The Warren Group use the median price for their reports. The median is susceptible to many problems, including changes in the mix of what is being sold being incorrectly represented as changes in the prices. This has been especially pertinent in recent months as the volume of sales has plummeted - something which is almost certain to change the mix of what is selling. The S&P/Case-Shiller Index, on the other hand, chains together same-home sales, thereby compensating for changes in the mix of types of houses. It is unfortunately published one month after the other sources, and so the reliability of the median cannot be gaged in the month in which it is reported.

Note that because the S&P/Case-Shiller Index is a 3 months moving composite, even the October numbers are not free of the first order effects of the tax credit as the credit still covered some sales from two of the three months used (August and September). The index will not be free of the direct effects of the credit until the end of February 2011, when the December 2010 numbers are released. Even afterward, the second order effects will continue to reverberate as the credit likely pulled forward some demand.

- admin

[Renting in Mass]

Nice summary

[admin]