Crashachusetts Existing Home Sales and Prices: March 2009

Today, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for March showing that single family home sales declined 4.7% on a year-over-year basis while condo sales dropped 19.8% over the same period firmly indicating that the Massachusetts residential real estate market is continuing to erode.

Further, the single family median home value declined a whopping 19.0% on a year-over-year basis to $255,000 while condo median prices dropped 14.9% to $224,500.

Clearly, the impact of the recent stock market crash (that keeps on crashing) and ongoing economic crisis is bearing down on both consumer sentiment and, more fundamentally, credit availability resulting in a significant pullback in spending on homes and other costly purchases.

It’s perfectly clear now that home sellers that choose to wait out the “down market” did so in vain as the 2008 selling season marked likely the last opportunity to sell any residential property at anywhere near the prices set in the peak boom years.

With confidence depressed and eroding and sale volumes this low, Boston area home prices have nowhere left to go but down.

Of course, the Massachusetts Association of Realtor president Gary Rogers continues his more hopeful tone while embracing government handouts for his industry:

“With the drop in prices, conditions still favor the buyer, especially the first-time homebuyer, and we do expect they will continue to respond well to the first-time homebuyer tax credit that was signed into law by President Obama in February.”

It’s important to keep the following points in mind when considering the impact of the housing tax credit legislation:

• The credit is for “first time” home buyers only… if you have had ownership interest in any home (including condos) anytime in the last three years you are NOT eligible.
• The credit has income restrictions of $75,000 for individuals and $150,000 for married couples filing jointly.
• The credit can only be used for principle residence.
• The credit cannot be applied to the downpayment.

So this is really a very limited program and will very likely NOT result in any noticeable increase in demand in our area.


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 home price movement.

Today’s Key Statistics:

Single Family results compared to March 2008

• Sales: declined 4.7%
• Median Selling Price: declined 19%
• Inventory: declined 19%
• Current Months Supply: 12.0
• Current Days on Market: 156

Condo results compared to March 2008

• Sales: declined 19.8%
• Median Selling Price: declined 14.9%
• Inventory: declined 26%
• Current Months supply: 13.3
• Current Days on Market: 158

Beantown Bust: Boston CSI and RPX February 2009

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 February, both the CSI and RPX showed continued weakness with the CSI declining 7.20% on a year-over-year basis while the RPX dropped 20.72% over the same period.

Further, both reports indicate that area home prices have suffered significant peak declines with the Boston CSI showing a decline of 18.46% since the peak set in September 2005 while the Boston RPX shows a 38.63% price decline since its peak of June 2005.

It’s important to note also that with the February release the Boston CSI has registered a peak decline that is well in excess (see peak charts below) of the than the peak decline seen during the 90s “savings and loan” housing bust.

Unfortunately for “homeowners” and housing speculators though, we are likely only just now reaching the cliff side for Boston area residential real estate prices.

The most obvious difference between the 90s housing bust and today is that during the 90s the home price decline occurred mostly in-line with the larger macroeconomic decline.

Today though, all of the home price decline seen prior to mid-2008 occurred within a backdrop of an (more or less) expanding economy.

Now that the economy has firmly taken a turn for the worse (particularly our local Boston area economy), home prices will suffer to the greatest degree seen in this cycle.

The following two charts compares the Boston CSI to the Massachusetts unemployment rate during the 90s bust and today.

Notice how early we are in the unemployment cycle today… there is lots more pain to go.


Recently S&P introduced a new line of data series that specifically track condominium prices in five select markets including Boston which showed that in February Boston condo prices declined 6.42% on a year-over-year basis and 15.87% on a peak decline basis (see chart below).

In all likelihood the dramatic declines to consumer confidence and increases in unemployment will work to place significant downward pressure on property prices, particularly condo prices, for the foreseeable future.

As you can see from the chart below (click for larger), although the RPX captures a greater degree of seasonality, both series are very strongly correlated.


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.



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.

The “annual” chart compares the percentage change, on a year-over-year basis, to the Boston CSI from the last positive value through the decline to the first positive value at the end of the decline.

In this way, this chart captures only the months that showed monthly “annual declines”.

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.

The final chart shows that the Boston housing market has been, in a sense, declining steadily since early 2001 when annual home price appreciation peaked and the intensity of the housing expansion began to wane (click on following chart for larger version).

It appears that that the main thrust of the housing expansion occurred “in-line” with the wider economic expansion that was fueled primarily by the dot-com bubble and that since the dot-com bust, the housing market has never been quite the same.