Tuesday, October 23, 2007

Back with a full market wrap

It's been three months since my last post. Way too long, but family and work deadlines come first.

After relatively strong months in July and August, the housing market in Massachusetts abruptly slowed in September. The mismatch in market results reported by the MAR (here) and the Warren Group (here) continues. Below is a comparison on the year over year change in SFH prices reported by both organizations over the past 19 months:

According to the more complete Warren Group numbers, SFH prices are down 4.4% from last September, and a cumulative 13.1% since September 2005.

Looking more closely at the MAR numbers, sales for both SFHs and condos plummeted in September:
Condo sales in September were the weakest since 2002, while SFH sales were the weakest since 1992 according to the MAR press release (PDF).

MAR continues to report that median prices are holding up fairly well:

Note that while median condo prices remain above past year levels, median SFH prices reported by MAR are down 5.5% from 2005 levels, and are below 2004 levels.

The one tentative sign of improving market conditions over the past year has been the better balance between for sale inventories and monthly sales (i.e., Months Inventory). The plummeting sales in September returned this figure to 12.1 months, close to last year's level.

Wednesday, July 25, 2007

June Market Wrap

Here's the latest price data from MAR for SFHs (down 1.6% YOY) and Condos (up 4.4% YOY) plotted relative to recent history:
Frankly I'm surprised MAR has been so restrained about the new record high median condo price reached in June. Perhaps even they recognize that the relatively strong sales in the pricey downtown Boston condo market (see story here) are skewing the median price higher.

MAR also offered up a summary of Q2 data (see here) which I'll cover in a future post.

Once again the Warren Group reported prices that were much weaker than MAR, with SFH prices down 4.6%, and condo prices down 4.1% YOY. Here's a comparison of SFH YOY price changes over the last 16 months from the two organizations.

The reason I want to emphasize this plot is that the differences between the two reports are now spanning at least a two year period, so the trend is beginning to amplify. For instance MAR reported 2007 prices down 1.6% relative to 2006, and 2006 down 1.1% from 2005 (pretty much the market peak). That means MAR numbers indicate that the statewide SFH median price has fallen a cumulative 2.7% from summer 2005.

In contrast, the Warren Group has 2007 prices down 4.6% from 2006, and 2006 prices down 3.9% from 2005, for a cumulative drop in SFH median price of >8%. Now that is a meaningful difference, and one I don't see mentioned anywhere in the local coverage.

Monday, July 16, 2007

March-April-May Market wrap

I'm back from a too long hiatus, and just wanted to post updated SFH and Condo prices published by MAR for March, April and May.

Reading the media and blog coverage of these data releases, I couldn't help but notice a growing move toward balancing MAR numbers with those from the Warren Group and others. Below, I've plotted the YOY change in SFH prices over the last 15 months from both MAR and the Warren Group. For comparison, I've also plotted the S&P Case-Schiller HPI for the Boston MSA, which differs from the others in that it reports prices from repeat transactions, in a smaller geographical area.

Clearly MAR numbers have trended toward less severe price declines than those from the Warren Group (I couldn't track down Sept 06 data). The difference was particularly pronounced in May (+0.65% vs -4.6%). One likely explanation for the trend: sellers at lower price points are increasingly selling without a realtor, hence some lower price transactions captured by the Warren Group are missed by the MAR.

Wednesday, March 28, 2007

Bear markets: how deep, how long?

Using the S&P/Case-Shiller® Home Price Index for comparable sales of single family homes in the Boston MSA, the peak of the late 80's / early 90's market occured in July 1988. Plotted below in black are the percent price declines in the subsequent 106 months relative to that peak.

The market did not bottom until ~36-48 months after the peak. One way to interpret this plot is that on aggregate, a home purchased in July 1988 would be sold at a loss for the next 106 months (>8.5 yrs). A home purchased when half of the ultimate price decline was complete (-8% @ ~24 months) would be sold at a loss during roughly the next 56 months (>4.5 yrs). These are NOT inflation adjusted prices. This does NOT include commision costs.

There is no reason to expect history to repeat itself exactly, but the yellow bars on the plot show very similar price declines from the recent September 05 market peak. The arrow indicates the most recent data release for January 2007. The final five bars in the plot correspond to the CME futures for the Boston MSA for the next 12 months (as of March 27).

Only time will tell whether the current bear market wil match or exceed the severity of the previous cycle. But the plot does provide cautionary evidence that purchasing in a falling market is no protection from potential losses for extended durations. Next time someone tells you "now is a great time to buy," keep this in mind.

Wednesday, March 21, 2007

February Market Wrap

MAR and the Warren Group reported market stats for MA this week. For once their numbers were in reasonable agreement. See the Boston Globe for the overview (here). Below are plots of SFH and condo median prices, as reported by MAR for the past few years:

One thing that I have been noticing is that MAR is continually revising their stats from past months/years. I don't have the time to keep up with their changes, and they don't bother to report the changes when they make them, so I will have to acknowledge that the numbers I'm plotting are "as originally reported." The differences are typically small, so not too big of a deal I guess. Doesn't do much for my confidence. I plan to spend more time from now on using the S&P/Case-Shiller® Home Price Indices, which have a number of advantages (see previous post here).

Months inventory continued to run below year ago levels in February:
December/January were unusually warm, and mortgage rates dropped, likely contributing to unusual seasonal strength in Jan/Feb closings. In Feb the weather turned and rates rose, and I expect the March closings and months inventory will suffer by comparison to last March (which was relatively strong).