The Arlington Artifice: November 2008
I choose Arlington as a result of the Boston Globe’s recently published and absurdly anecdotal and ludicrous farce about the town’s “hot” housing market.
The ridiculous tone and outright mishandling of the housing data by the Boston Globe “reporter” would almost be comical if it weren’t for the fact that the Globe’s editor, Martin Baron, ALSO blundered seriously when he responded to my email about the discrepancies.
Baron attempted to justify the articles contents and in so doing, he disclosed his disgracefully poor and obviously unsophisticated abilities with even the most basic economic data.
The November results again confirm that Arlington is by no means a “stand out” amongst its neighboring towns as Baron suggested in his email and, in fact, is following along on a path wholly consistent with the trend seen in the county, state, region and nation.
Why would an editor of a nationally recognized newspaper think that a single town would continue to function as an isolated bubble amongst a backdrop of the most significant nationwide housing recession since the Great Depression?
As I have shown in my prior posts, this data when charted and compared to other towns in the region proves there are absolutely no grounds to call Arlington’s market exceptional.
The most notable feature of the recent results is unquestionably the low number of home sales with only 231 sales for the entire year to date, the lowest readings since the recessionary period of 1990.
Another important point to remember is that when sales decline dramatically the median selling price can jump wildly up or down since the small number of sales provides a small set with which to determine the “middle” selling price.
The following chart (click for much larger version) shows a history of Arlington’s November median sales price since 1988 along with the annual outcome.
Regular readers will notice that the “year-to-date” median selling price, a more accurate median indicator, has declined significantly from where it stood earlier in the year as the number of home sales have slowly accumulated and now stands at $475,000.
My expectation, now that we are in the weakest season for home sales, is for the median selling price to slide well below $470,000 by the end of the year.
The next chart (click for much larger version) shows that annual home sales in Arlington have fluctuated in a range between 233 and 381 over the last 21 years with the peak selling year being 1998.
This is not such a surprising result for those that have observed Arlington’s real estate market over the last two decades.
Arlington experienced tremendous growth during the 90s internet boom as young families sought its desirable location and outstanding (presumed…) school system.
Now though, it looks as though Arlington is, more or less, a perfect representation of a town struggling with our secular bear market economy.
Its housing market has essentially been eroding since the peak of the internet economy and not even the unusual conditions of the housing bubble could bring back the outstanding growth experienced during that era.
In recent years, Arlington has found itself falling behind with state cutbacks and lower property tax revenues leading to public funding stress and particularly the postponement of the much needed renovation of two dilapidated schools.
Further, the MCAS scores (a much followed measure of academic achievement of lack thereof) of some of the towns elementary schools have been in decline for multiple years with at least one Arlington school being designated for the development of a “year 1 improvement plan” by the state department of education.
With the economy headed into likely its worst recessionary years of the post-WWII period, it will be interesting to watch how this firmly middle class suburban town copes.
The final chart shows how the year-to-date median sales price and combined sale count for Arlington, Bedford, Belmont, Cambridge and Lexington have changed since 1988.
Notice again that as sales have mounted for the year, the median values are looking generally flat to trending down.
My expectation is that all the towns except for Cambridge (which will likely be flat to modestly up on record low number of single family sales) will have lower medians than 2007.
In review, the data shows that there is nothing exceptional about Arlington’s housing market proving clearly that the claims made in the Boston Globe article and later endorsed by its editor Martin Baron were entirely erroneous.
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