More on home prices

I think most notably in analyzing Boston specifically, it had the lowest drop of any of the major cities; Chicago, New York, Los Angeles and San Francisco among them.

If you compare Boston to most of the other cities in the index, you'll see that the bubble has not been as significant here as in most of the other cities. That may help explain why Boston's declines have been more modest.

Also, if you discount the fact that Quincy is included in the Case Shiller region defined as "Boston" the news is even brighter. In downtown Boston the median price is actually up.

John - median price for an area and the S&P/Case-Shiller Index are two different things. Median prices takes the median of all sale prices in a given time frame. The S&P/Case-Shiller Index actually looks at housing pairs, i.e. the change in price of the SAME house.

The median price can be skewed but a shift in demographic, i.e. more high-end sales, or more low-end sales. Also, it tends to be very erratic for small sample sizes.

Boston did not have the lowest drop of the major cities. We can see the data!

Also, the Case Shiller numbers are not "median" prices. They are based on an index, and cannot be easily compared to cherry-picked MAR numbers.

I assume John was talking about something other than S&P/Case-Shiller numbers since the index is not a median. The Warren Group provides price data for downtown Boston, for which they include the Back Bay, Beacon Hill, North End and South End only. The median condo price for January 2008 (the most recent available on their website) was $530,000, whereas it was $603,250 in January 2007. That's a 12% drop and would be even greater when you consider inflation.

Average prices are down about 10% from their peak in our Massachusetts region. That sounds about right, even though I have personally seen closer to 15%. Effectively, Boston and its metros are at 2003 levels now. There appears to be some downward momentum going that will carry prices down a little further.

Unlike Southern California and Florida, the economy in Mass never transitioned to being fully RE-centric. Sure, housing costs were too high, but they were were controlled. Perhaps the slight drain in population over the past few years helped. Anyway, with so many good companies in the state, the Mass economy remained more about technology and sciences. Now, in the post housing bubble era, the region is rewarded with less home price decreases than other major US metros.

I am usually quite bearish on home prices, but I must admit Massachusetts isnt in nearly as much trouble as some of the other US metros. Of course, the state must remain competitive and business friendly to stay that way. There is little to be gained with complacency, and everything to lose.

Year over year comparisons from 2007 to 2006 are misleading because 2006 had an unusual price change pattern over the year. The first 10 months of 2006 were pretty flat, with a 1.3% decline over that whole time. November and December of that year had sharp drops (> 1%) each month. This pattern masks the sharp drops in the last two months of 2007, because they are being compared with the last two months of 2006.

What happened to Boston area prices in 2007 was slight up and down movements the first nine months of the year, leaving September prices about 1.6% higher than the start of the year. Since then, prices have been steaming down, dropping on a month by month basis by .81%, 1.15%, 1.62%, and 1.22%.

The use of "flattened,... between 3 and 4 percent" leaves the misimpression that if things go on as they have been, there will be a slight decline over the next year. In fact, if the month over month prices changes of the last four months continue for the next year, prices a year from now will be over 15% below where they are now, which is almost 11% below the peak.

Marcus, my apologies if you consider cities like Charlotte, NC or Austin TX to be "major cities." In a graph I studied elsewhere, Boston was grouped in a table with New York, Los Angeles, Chicago, San Francisco and Miami among others where Boston's numbers were impressive given the other cities. There were of course other cities that I would personally refer to as secondary large cities that had lower numbers of decline and Charlotte, NC as I recall even had an increase.

Avi Rome, I said before: We are reading the data. Are you? My list came directly from the S&P press release.

It's easy to come to the conclusion you want when you cherry-pick the data that fits. The C-S index doesn't work that way.

THough the rate of decline may be flattening, that means actual decline is still going along at a good pace.

And it will continue to get worse - a lot of sellers are holding out for the spring market, thinking that will solve all their problems.

But the simple fact is, house prices will go down until buyers can afford them. The bubble is over, and people will no longer stretch because "real estate always goes up".

So that means a family earning $100k will be able to afford a $350k house. Even if they think they can afford more, the bank is unlikely to agree. And if that 350k house sold for 500k last year, it doesn't matter - the price will have to reset.

I sold out of my real estate in August 2005, btw. This drop was eminently predictable.

Charles - i agree with your post. Many people are hoping this is the "bottom", but in reality it's just the decline that's slowing, and probably not the end of price declines.

My best bet is that even if prices were at the bottom, they would stay here for quite a while. As you mentioned, lenders are less likely to let borrowers stretch, and maybe as important, buyers themselves have been hurt, either monetarily or possibly more important, psychologically. The realization that home prices don't go up for ever and that you CAN lose money will have a major impact on homebuying decisions for the next several years, and I don't think the experts are factoring that in.