Metrics of market direction

The Wall Street Journal's Real Estate Journal recently addressed the metrics to evaluate when sizing up a market's near-term direction. Let's see how MA stacks up:

As a rule of thumb, assume that most home shoppers won't want to take on a mortgage that's more than three times their annual income.
Creative financing and record-low mortgage rates made this rule of thumb temporarily obsolete, but rising rates will bring it back into play. While I don't know the average mortgage to income ratios in MA, the current ratio of median SFH price (2005) to median (2004) income is ~6.5, for condos it is ~5 in MA.

Among the local factors you should check are inventory levels, which measure how long it takes for houses to sell, assuming no other houses were listed. (Equilibrium is between five and six months -- anything shorter indicates tight supply, which tends to lead to higher prices).
No need to add to recent posts covering the surge of inventory levels that continues unabated.

Also check out housing starts and permits -- rising numbers could mean that a market is becoming overbuilt, which can cause prices to drop.
This is not typically a problem in MA, but I've made the case (here and here) that even the relatively modest increases in new construction currently underway will glut the market as outmigration and demographic changes play out (see here).

Also, take a look at time on the market -- if this number is rising, it can be an early warning sign that a market is cooling.
Check out this recent Boston Herald article that points out the growing inventory and days on market in MA.

Of course, you'll want to find out if prices are being cut in your target neighborhood.
Statewide median prices have already peaked and look poised to turn down as the year progresses. According to ZIP Realty, of the 46,500 houses for sale in the greater Boston area, >33% (15,700 houses) have reduced list prices. For a closer look at individual homes, towns, and zip codes, including historical value plots, check out the wealth of info available at Zillow.com.