Today, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for January 2008 and simultaneously Standard & Poor’s released their Case-Shiller Home Price Index for December 2007 both showing, perfectly clearly, the truly dire circumstances that have now befallen the Bay State’s housing market.Whether it was a slow depression brought about by over two solid years of steadily declining home sales and prices, the credit crunch, a looming recession, a palpable increase in inflation of necessities like food and fuel or just simply a change in attitudes toward the notion of a house as a vehicle for wealth, the regions housing markets have now hit a dangerous tipping point.
It appears that we have entered the “price freefall” phase of the housing decline where mounting inventory, declining sales, and negative sentiment all combine to result in plunging home prices which, quite possibly, may continue to decline substantially even through the spring and summer months which are typically strong periods in any selling season.
Of course Massachusetts’s Realtor leader Susan Renfrew, who seems to find a silver lining in every storm, projects a sense of confidence and “opportunity” in part created as a result of the federal government bailout package.
“Sales in any given month are a result of buyer activity 60 to 90 days prior, and there is no question January reflects the anxiety people were feeling about the economy that last two months of 2007 … However, this continues to be a buyer’s market and there is opportunity. That combined with low interest rates and the economic stimulus package recently signed by President Bush, should help the market.”
These are troubling times indeed…
MAR reports that in January, single family home sales plummeted 27.7% as compared to January 2007 with an 8% increase in inventory translating to a truly massive 15.4 months of supply and a median selling price decline of 5.6% while condo sales plunged 33.7% with a 1% increase in inventory translating to a startling 16.6 months of supply and a median selling price increase of 3.5%.
The S&P/Case-Shiller Home Price Index for Boston, which is the most accurate indicator of the true price movement for single family homes, showed accelerating prices declines (prices are falling faster) with Boston declining 3.3% as compared to December 2006 leaving prices now 9.8% below the peak set in September 2005.To better illustrate the drop-off in home prices and the potential length and depth of the current housing decline, I have compared BOTH the normalized price movement and peak percentage changes to the S&P/Case-Shiller home price index for Boston (BOXR) from the 80s-90s housing bust to today’s bust (ultra-hat tip to the great Massachusetts Housing Blog for the concept).
The “normalized” chart compares the normalized Boston price index from the peak of the 80s-90s bust to the peak of today’s bust.Notice that during the 80s-90s bust prices took roughly 46 months (3.8 years) to bottom out but that the decline was not quite a sheer as what we are seeing today.
The “peak” chart compares the percentage change, comparing monthly Boston index values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.
In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.
As you can see the last downturn lasted 105 months (almost 9 years) peak to peak including 34 months of annual price declines during the heart of the downturn.
Notice that peak declines have been more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.
As in months past, be on the lookout for the inflation adjusted charts produced by BostonBubble.com for an even more accurate "real" view of the current market trend.
January’s Key MAR Statistics:
- Single family sales declined 27.7% as compared to January 2007
- Single family median price decreased 5.6% as compared to January 2007
- Condo sales declined 33.7% as compared to January 2007
- Condo median price increased 3.5% as compared to January 2007
- The number of months supply of single family homes stands at 15.4 months.
- The number of months supply of condos stands at 16.6 months.
- The average “days on market” for single family homes stands at 143 days.
- The average “days on market” for condos stands at 165 days.
