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 

 
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 - Jun 2011
Goto page 1, 2  Next
 
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: 1818
Location: Greater Boston

PostPosted: Fri Jul 29, 2011 12:45 pm GMT    Post subject: Boston Bubble Wrap: The Real Story for MA - Jun 2011 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 2011 on Tuesday, July 26th. 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 - June 2011

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



Some observations:

  • The real decrease from June 2010 to June 2011 was 4.80%.
  • Prices have resumed their downward trend after a period of twelve consecutive year over year increases. Those were the only year over year increases since August 2005 and they all occurred consecutively and after the most recent renewal and expansion of the home buyer tax credit. The moving average turned negative in April for the first time since the end of the tax credit. Price declines are once again the norm after being briefly interrupted by buyers being misled into mistaking one of many backdoor bank bailouts for a good buying opportunity.
  • Real prices are once again lower than the same month in every year in the time period covered by The MAR, with the exception of 2009. Additionally, the real median has plummeted back below the estimates for prior years and is now the lowest it has been since the estimate for 2001.
  • Prices are now 25.62% below the peak set in June 2005. This is the result of a 12.82% decline in nominal housing prices and a 14.68% decline in the purchasing power of the dollar. This comparison is especially pertinent this month given that the peak also occurred in the same month of the year, and seasonal variations are therefore not a factor.
  • The cumulative price decline from the beginning of the MAR's data (Feb 2003) is 7.70%, which is an annualized decline of 0.96%.


Once again this month, the volume of single family home sales fell dramatically from one year earlier. Sales were down 18% compared with one year earlier. This makes the median even less reliable than usual given that the mix of what is selling is almost certainly changing, and that necessarily distorts the median as a consequence of how it is calculated.

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 2011 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=3569 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=3569

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
dude1040EZ
Guest





PostPosted: Mon Aug 15, 2011 5:12 pm GMT    Post subject: short term bottom soon? Reply with quote

The rent are fastly catching up to the monthly mortgage payment in some metro Boston areas, looks like at least a short term bottom is about to be reached in Boston housing market. With low rate and bad intensional acts of the FED to try to inflate our way out of the current economic mess, I don't see how the Boston housing market will go through another 5 to 10% drop in the near future, except some ultra expensive towns such as Brookline, Weston etc... Housing market should go through another correction only if the interest rate start hiking up, which will be at least 2 years from now (FED just said it out loud). The inflation of the next 2 years will be terrible, which should stablized the housing price and kick it back up a tinny bit. Then the FED will tell you everything is back to normal! The only thing FED didn't mention is, your monthly income has been eaten up by inflation.
Food price will be the true indicator of how bad inflation is going to get, keep track of your food expense each month for the next 2 years, you will see how much you get screwed by the QE1, QE2, QE2.1 that FED did and is about to do. If your found the rent start covering mortgage plus tax plus insurance, BUY, BUY, BUY!
Back to top
admin
Site Admin


Joined: 14 Jul 2005
Posts: 1818
Location: Greater Boston

PostPosted: Mon Aug 15, 2011 5:25 pm GMT    Post subject: Re: short term bottom soon? Reply with quote

The Fed doesn't (directly) control mortgage rates. Their commitment to keep rates near 0% until 2013 is for the fed funds rate. Mortgages are tied more to 10 year Treasuries and hence inflation expectations. If we do get inflation, I would expect mortgage rates to rise, regardless of what the fed funds rate is.

I do think you are right that additional, substantial price declines (in real terms) might not happen until mortgage rates rise. However, I don't think this translates into a strong incentive to buy because the downside risk to prices is far greater than usual, should rates rise before you sell. You should also consider maintenance, transaction costs, and decreased mobility in your price comparison.

- admin
Back to top
View user's profile Send private message Send e-mail Visit poster's website
dude1040EZ
Guest





PostPosted: Mon Aug 15, 2011 7:39 pm GMT    Post subject: to admin and others Reply with quote

Yeah, so the FED INDRECTLY manipulated the mortgage interest rate by telling you 1. The FED rate will be zero for the next 2 years, 2. There will be no inflationary risk in the near term. Both statement will be true, as long as the “near term” in the second statement is shorter than 2 years, Which means the inflation is F***ing at the corner. We all know how the FED defines the inflation risk, it excludes pretty much all necessities (food, gas, energy, currency devaluation) from its formula, so the number is too distanced from the reality to make sense. The recent treasury yield drop is irrational, it should go the other way but the result was twisted by some B.S. data. Instead of drinking the koolaid from the FED, I urge people to take advantage of this rate drop and lock it in for your advantage (buy whatever asset that you can financed with this super low rate). Buying a house is good, as long as the rent this house generates can cover long term cost such as mortgage plus tax plus insurance. Other costs admin mentions are either short term or unpredictable, it is NOT as major decision maker as the 3 I mentioned.
Again, I predict the rate will get hiked by some B.S. reasons in the near future, just like it got dropped by the same craps recently. It will catch everyone by surprise, but it will happen. When it happens, it will be too late for the general public to take an advantage of the situation. Between now and then, inflation will be BAD, SUPER BAD. It is so BAD, that it will even lift the house market back up from below the water. Here is how I come to this conclusion, when it requires about $120 dollars per SQ foot to build, and yet you can buy the house with land for less than $200 bucks per SQ foot, I would say it is below cost sale. I start to see these kinds of deals showing in decent part of the metro area recently. Well, please exclude “gang lands” in Boston and “remote towns” from western MA area in this situation. During this whole inflate-the-problem-away process unroll itself, the living standard of you and me are degraded by discounted buying power of U.S. dollars. It is the biggest public rip of ever in the history. Try to hedge it? Please stay away from gold, as it is way over priced. Buying beat up assets with this super low rate, in this case, money generating properties in decent areas will not be a bad idea. “Piss with the wind” so you can screw back whoever try to screw you in the first place.
Back to top
admin
Site Admin


Joined: 14 Jul 2005
Posts: 1818
Location: Greater Boston

PostPosted: Mon Aug 15, 2011 8:00 pm GMT    Post subject: Reply with quote

I think it goes the other way, actually. Given a constant monthly payment, it would be vastly preferable to buy when inflation and rates are high:

http://www.cepr.net/index.php/publications/reports/the-housing-affordability-index-a-case-of-economic-malpractice/

That isn't to say that buying now would be an especially bad idea, just that I don't consider it an urgent situation where you would miss out by not buying now, unless you plan to over-leverage, or unless we end up with deflation instead.

As for the other costs I listed, I don't think any of them are short term, and most of them are indeed predictable. Transaction costs are around 6% every 7 years (average owning time). Maintenance is around 1% a year, on average. That can vary wildly, but it's a large enough expense that you really shouldn't ignore it. Reduction in mobility is a little harder to put a number on, but it's still not that hard to come up with a ballpark estimate if you know how much your time is worth per hour and how your commute may vary by changing job situations.

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



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Mon Aug 15, 2011 9:14 pm GMT    Post subject: Reply with quote

The FED is charged with two basic things:

1. Minimize the risk of inflation

2. Maintain a reasonable unemployment level


Things get kind of complicated when we are in a Global Economy where our currency is a reserve currency for many nations. What makes sense given these two items within the scope of the United States, sometimes gets skewed when you factor in global influence.

Stagflation is when prices go up like gasoline, taxes, food, etc. but unemployment is high and wages don't keep up with expenses.

The events in Europe and China will tug at our Economy; we're kind of all tied together to some degree.

I also feel your frustration with the whole uncertainty.

I think that if you have a sizeable down payment available, waiting for mortgage rates to go up will drive down prices, so it would be good. If you have a smaller down payment it could be either or...
Back to top
View user's profile Send private message
dude1040EZ
Guest





PostPosted: Mon Aug 15, 2011 9:36 pm GMT    Post subject: Reply with quote

The current situation is, an artificial inflationary situation is about to be created by the ultra low FED over night lending rate from the FED(indirectly). High inflation and high rate can only exist in situation when the FED tries to fight stagflation. We are actually in early stage of stagflation, but FED will deny it to the end of the world. According to the FED, no inflation risk any time soon, right? So I don’t think we will be seeing high rate any time soon. The FED needs to deny it to justify the money printing act. The intension is to print more money to devaluate the dollar, so dilute the true debt amount we will be repaying to other countries. Also increase importation, as well as our pricing competitiveness in the global market. It is a brilliant idea to deal with our deficit and potentially lift up our economy, if it worked as planned; but it is a horrible idea for responsible people who try to save and live within the mean with their hard earned U.S. Dollars. There are NOT many options out there for average Joe to hedge this brilliant idea. Let’s look at some options out there.
1. Saving and CD: SCREWED big time by the FED rate (indirectly).
2. Stock and bonds: equity and fix income markets actually go side-way, buy and hold will give you zero. The V shape in equity market we saw last 2 years are the direct result of QE1, QE2, now soon there is going to be something like QE3, which call “NO RATE HIKE REGARDLESS OF WHATEVER INFLATION IN THE NEXT 2 YEARS”. Fix income market has to deal with low rate of return extend from the FED rate! So side-way is the new normal. This kind of market is not for our 401k to earn its 8% a year, despite saying the 4% plus true inflation rate will further cut the return.
3. Gold and Silver: Over priced, feel free to jump in.
4. Currencies: There is a global race of currencies devaluation event going on right now, as every countries try to do that, yet has to deal with even worse inflation. So sometime in the near future, I am not sure what event it would be, but something going to trigger a global rate hike. It is hard to predict, but if you are really good professional investor in some internal information, easy money can be made here. But again, too risky for average person to jump in.
5. Commodity: good way to hedge, if you know what you are buying. Take a look at oil price for the last 2 years. Roller coaster it is, a lot of money to be made, if you know when to buy and sell. Very risky.
6. Real estates: The government is trying whatever it takes to jack it back to a stable healthy price level, as soon as possible. It needs an upbeat housing market, so it can tax more to balance the budget, and it needs it to give the general public its confidence back. This is the “wind”. It is up to you to “piss” with it or “piss” against it.

See, the least risky option is #6 in the current situation, because if you pick #6, then Uncle Sam and FED has the same intension as you are. They will helps you to get your American dream. Of course, sometime the best plan will fail, but if it doesn’t work out, there could be QE4 to patch your nightmare, so it looks like a dream with lipstick on again.
Back to top
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Aug 16, 2011 2:21 pm GMT    Post subject: Reply with quote

The rest of the World will see our "Quantitative Easing" efforts as currency manipulation.

They will see it as the United States holding the global medium of exchange and abusing that power to print money go give its citizens more buying power and to prevent them from feeling the pain.

The more and more other nations feel the pain of this Global Recession, the more the resentment of the United States will grow. V. Putin called the United States a "parasite".

Everyone thought Obama would help rebuild the perception of the United States in the World, but the new face of the "Ugly American" will be a delusional entitlement society that thinks because of our Military Power we can print as much money as we want.

Of course we can defend the position that China is manipulating their currency, and Russia would nip at our heels if the wind blew, but start to be a bit concerned when European or South American nations start to voice concern about our "Quantitative Easing".

Throughout History, mankind has always seemed to paint themselves into a corner and that has forced nations and kingdoms to become predators. There haven't been many centuries without War for this very reason.
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Aug 16, 2011 5:09 pm GMT    Post subject: Reply with quote

http://www.huffingtonpost.com/2010/11/05/fed-bernanke_n_779393.html
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Aug 16, 2011 5:09 pm GMT    Post subject: Reply with quote

http://www.huffingtonpost.com/2010/11/05/fed-bernanke_n_779393.html
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Aug 17, 2011 2:28 pm GMT    Post subject: Reply with quote

Also, keep in mind that this whole thing is going to unfold in stages:

http://www.cnn.com/2011/BUSINESS/08/17/germany.merkel.popularity/index.html

This article explains the political pressures on Germany's Chancelor Angela Merkel.

While the World and especially Europe love her patience and tolerance of the other socialistic nations financial needs, her own Nation is overwhemingly opposed to Germany's bailing out other nations for what they see as their own self created hardship and irresponsibility. Why should the German people have to suffer because of what their irresponsible neighbors did?

So think about the next stage of this. Angela Merkel loses the next election, and to whom? What will be the position of the new Chancelor?

In like 2006/2007 I was commenting about how the ownership rich was taking out a lot of money from the economy and who's wealth was growing faster than the working population. I predicted that a left wing socialist leaning politician was going to come to power and at the time I really knew very little about Barack Obama. The point is that the cutout was right there and he filled the position perfectly.

Think of it this way, Political Parties frame issues and then plug in members of their Party into these cutouts. What responsible citizens need to do is try to get at the truth to see if the issues are being framed properly.

The political scene is like watching paradigm shifts ping ponging back and forth and as the situation amplifies the cutouts get more extreme and polar. Rick Perry is hardly a moderate. He say's the FED's Bernake is guilty of treason. He's leading in some of the polls. I mean having a political position that thinks Quantitative Easing is hurting us is worth listening to, but when people put extreme characterizations on a valid position, it makes you nervous. Think about it, the United States is supposedly civilized; you don't think that these extreme figbres aren't going to emerge in other nations?

Is the cutlture of the whole Debt Ceiling fiasco a tell sign of things to come on an international level? Will we get more international leaders who use language like "Treason"? Putin called the United States a "parasite". Now Barack Obama is President so Obama didn't even dignify the insult, but imagine if the gun packing Rick Perry heard Vladimir Putin calling us a "Parasite".

What is funny to me is Ron Paul, how he is ignored. Ron Paul says that one Party is in love with Entitlements that we can't afford and the other is in love with War. Clearly, sitting in the middle of the road, you can get hit by those on both sides.

http://www.thedailyshow.com/watch/tue-september-29-2009/ron-paul
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Aug 17, 2011 2:41 pm GMT    Post subject: Reply with quote

This is hilarious:

http://www.thedailyshow.com/watch/mon-august-15-2011/indecision-2012---corn-polled-edition---ron-paul---the-top-tier
Back to top
View user's profile Send private message
Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Wed Aug 17, 2011 3:41 pm GMT    Post subject: Reply with quote

john p wrote:
Think of it this way, Political Parties frame issues and then plug in members of their Party into these cutouts. What responsible citizens need to do is try to get at the truth to see if the issues are being framed properly.


My sentiment was that politics is about theatre. So for me, the Tea Party was a theatrical attempt at small govt/fiscal responsibility but in reality, it was kinda late to the scene, as it's no longer 1995 and the USA is about finance, not R&D nor manufacturing. So fine, prune the "financial machinery" and all you have left is corn and mining ... pretty much a 3rd world nation's portfolio.

Thus, corporatism is the real party of the land and each subdivision: Tea Party, Dems, GOP, etc, are for *show and tell* but just like in a school classroom, the students will never overthrow the teachers or principals, no matter what Pink Floyd says.

The end result is the same... there will be multinational corporations a/o financial guilds and each and every person will have to find one's cog in the machinery, whether it be on the govt services side of the fence or the private one. The ideas of liberty and prosperity have gone the way of the 70s and 80s.
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Thu Aug 18, 2011 4:56 pm GMT    Post subject: Reply with quote

Bernanke didn't commit Treason, but listen to him and see for yourself what he might have been guilty of.

He was our Chief Economist and he really didn't think we were in a Bubble in 2005.

http://www.youtube.com/watch?v=MnekzRuu8wo
Back to top
View user's profile Send private message
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Thu Aug 18, 2011 5:39 pm GMT    Post subject: Reply with quote

Ron Paul

http://www.youtube.com/watch?v=INvKPYdTs3E&feature=related

Peter Schiff is fantastic to listen to.

go to youtube and listen to this guy and listen to people laughing at him....
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond All times are GMT
Goto page 1, 2  Next
Page 1 of 2

 
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