Friday, February 26, 2010

Beantown Bust: Boston Home Sales and Prices January 2010

This week, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for January showing that single family homes sales declined 37% on a month-to-month basis but remained 9.1% above the level seen last year while condo sales continued to surge jumping 35% since January 2009.

The single family median home value increased 14.1% on a year-over-year basis to $300,000 while condo median prices increased 26.5% to $257,980.

Although both sales and prices were up notably, it’s important to recognize that the majority of the activity seen in the late fall came as a result of the governments housing tax gimmick and since the epic November surge, sales have been trailing off steadily.

In fact, there is slight possibility that next month’s sales results could actually drop below the level seen in February 2009 as the sales that were incentivized into November take their toll on future months.

We’ll have to wait to see…

The S&P/Case-Shiller (CSI) Home Price index together with the Radar Logic (RPX) for Boston represent the most accurate indicators of the true price movement for both single family homes and the entire residential real estate market as a whole (singles, multi and condos).

For December, both the CSI and RPX confirmed that there has been an “extra-seasonal” bounce in prices that while cooling notably going into October, has remained elevated with the latest data showing a month-to-month decline of 0.14% to the CSI and a 2.49% increase to the RPX while on a year-over-year basis the CSI increased 0.47% while the RPX increased 13.91% over the same period.

As for condos, the latest S&P/Case-Shiller data indicated that prices declined slightly dropping 0.09% on a year-over-year basis.

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, annual and peak percentage changes to the Boston CSI home price index from the 80s-90s housing bust to today’s bust.

It’s important to note that the CSI data is now showing the first nominal year-over-year gain in 45 consecutive months and, when comparing to the 90s housing bust, appears to indicate that the period of nominal annual price declines may be complete yet, again, since much of the strength recently has come on the back of massive government stimulus, we will have to wait to see how the trend shapes up.

The “normalized” chart compares the normalized Boston price index from the peak of the 80s-90s bust to the peak of today’s bust.

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 while today we have seen 45 consecutive months of annual price declines.

As in months past, be on the lookout for the inflation adjusted charts produced by for an even more accurate "real" view of the current home price movement.