Tuesday, September 26, 2006

August Market Wrap

MAR and the Warren Group reported similar August sales stats yesterday. Here are the MAR numbers plotted vs recent historical trends for SFHs and condos in Massachusetts.



Quotes of the month in reaction to these numbers:

1. From the MAR report (PDF here): "Today’s lower prices reflect the moderation in housing demand and rise in the inventory of unsold homes, which has led sellers to make modest price adjustments. With the economy still healthy though, double-digit price declines seem unlikely." (emphasis added) Remember, it was a little over a year ago (8/15/05, see previous post here) that MAR stated "we don’t anticipate any decline in prices in the foreseeable future, unless the economy slips into a recession.”

2. From the Boston Globe (here, and thank you for finally interviewing someone other than a realtor for comment): ``Things are not over in terms of the price declines," said David Iaia, a senior principal for Global Insight, a Lexington economics consulting firm. Iaia said the state's price declines would continue in 2007 and possibly into 2008, though it is difficult to predict. (emphasis added)

3. From the Boston Herald (here): Warren Group CEO Tim Warren said prices are dropping because “buyers are tasting blood, and they’re starting to get more aggressive (about) pricing.” (emphasis added)

9 comments:

TheLievense said...

Just wanted to say thanks again for your awesome posts, seeing this information graphed out is just incredible, not only are we under 2005 prices, but I didn't realize we had dropped below 2004 prices. That's huge! 2 years of profits wiped out just like that. How there are ANY sales to me at a time like this is amazing.

westsidebubble said...

can you post the exact % change from 2004 for SFH and Condos? I can't find 2004 data anywhere.

Thanks for publishing these charts!

DT said...

Thanks for the positive comments. You can find the archived sales figures at the MAR website at: http://www.marealtor.com/content
/monthly_reports.htm

Median August prices for SFHS in 2004, 05, and 06 were $358K, $375K and $352K, so prices are down 1.7% from 2004. For condos in 2004, 05, 06, prices were $274K, $288K and $278K.

bostonbubble said...

Quote: With the economy still healthy though, double-digit price declines seem unlikely

When adjusted for inflation, we just hit double digit declines. The August 2006 SFH median was 10.18% below the August 2005 median, in real terms.

notsofastlouie said...

Apartment vacancy dropping, rents rising this year: article full of stats -

http://www.dwellings.com/dw/pages/news.html

notsofastlouie said...

Office vacancy is declining faster than projected as a result of new hiring - 12,000+ business and professional jobs in the urban core:

http://www.m-g.com/pdfs/market%20viewpoint%20q2%202006.pdf

notsofastlouie said...

The following article summarizes a study by Moody's Economy.com on housing markets in 100 metro areas. While prices are forecast to decline in 100 metros, Moody's thinks Boston prices have bottomed out. Following the link and a quote from the article:

http://biz.yahoo.com/weekend/weakhome_1.html

"While various studies generally agree that some of the biggest risks of declines are in California and Florida, there are striking differences, reflecting different forecasting methods. For instance, a recent "risk index" study published by PMI Mortgage Insurance Co. ranks the Boston metro area as the seventh-riskiest in the nation in terms of the likelihood of price declines over the next two years. But Economy.com says that home prices in Boston likely bottomed out in this year's third quarter after a modest 2.2% decline."

notsofastlouie said...

An impressive 4,000 more jobs were created in Massachusetts in September vs. the same month last year. 33,000 jobs over the last twelve months. See:

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=SMS2500000000000001&data_tool=%2522EaG%2522

This job creation explains the higher demand for rental housing and the decline in rental vacancy. Owner-occupied housing has an extremely low vacancy rate, too. At this pace, housing demand from new jobs may actually outpace new housing supply, at least in the urban core market.

The fact that the recent Economy.com study singled out Boston as a market that was unlikely to correct further is worth pausing over. For one thing, it is important to note that while housing costs represent over 40% of income in Southern California, they represent only 22-24% of income in the greater Boston area - in line with historical averages. (The price to income ratio is higher now because of lower interest rates.)

The recent drop in prices can be easily explained by the rapid rise in mortgage rates this last spring/early summer (a 1 point increase in rates or 20% increase in mortgage payments) - which priced many buyers out of the market, since sellers did not drop prices - resulting in the rapid increase in inventory.

Assuming current conditions hold (interest rates, job growth) and the population at least remains stable, the supply/demand ratio next year may well be less favorable to buyers. We would, under such conditions, see strong net absorption and price recovery.

The fact that we swung from a seller's market to a buyer's market these last twelve months does not mean that buyers will continue to have more and more leverage over sellers in the next twelve months.

notsofastlouie said...

Oh yes: and interest rates have fallen back between 25-50 basis points in the last 8 weeks, which will increase purchasing power, hence demand, hence prices...