Prices still up in some towns

cue the angry response from Marcus . . .

I wouldn't be so fast to proclaim higher medians as a sign of a healthy market. If you note, those increases correlate with incredible decreases in sales volume, more than 40% in Hingham and Needham.

If home values were in fact increasing, you would expect to see increased sales as homeowners cash in. What these numbers likely actually suggest is that homeowners at the bottom of the market simply can't afford to sell at current market value. Thus, only expensive homes are selling, and the median goes up.

Numbers like these preceded the drop in the Bay area about a year ago.

Nope. In May, SFH medians fell in Lexington and Dedham; Needham was up YOY but still down over 8% since '06. And the Newton SFH median is certainly not down "less than 3%"--it's down almost 11% from last year.

Every time you post these maps, you need to clarify 1) the same towns do not appear on every map, thus blowing the "immune" argument out of the water and 2) you are using YTD statistics, meaning you get to count January up to 12 times in order to prove your consistency argument.

Most buyers have wised up, but a few are still in danger of getting burned by bubble spin.

I find it really bizarre that in one of the worst real estate slumps in a generation, the articles on this blog have tended more often than not to discuss rising prices, bidding wars, seller's markets, etc.

I don't get it.

What's going on?

I note the headline right above this blog is.

"Massachusetts home prices drop 9.2%
The median selling price in May fell to $322,500, compared to $355,000 in May 2007. The volume of home sales fell 10.1 percent. "

None of which I would call good news.

There is definitely a flight to quality in down markets, and places like Newton, Lexington et al will not drop as much or as fast. But the trend is also clear that they will drop eventually - the lower markets are the canary in the coal mine, as it were.

Real estate is a unified market, and just as price rises at the bottom eventually lift the top, price falls at the bottom eventually lower the top.

I love the MAR spin on these numbers as quoted in the globe article - its really funny. "Lousy numbers but sales are up in the spring". Well yes.... its the spring market, part of the normal cycle. The fact a spring market is taking place means nothing about overall trends, that's just normal yearly cycle.

Year over year numbers per month are what matters, and that continues to be hideous.

Kathy:

From reading this blog for a while, "what is going on" is exactly what our esteemed host has been trying to figure out. Despite all the bad news, certain parts of the greater Boston market seem remarkably, and counter intuitively, robust.

My personal perspective is that there are always going to be more people who want to live near Boston than there is available quality housing, and it is young professionals (like me and my fiance) who were previously priced out of the market who are currently picking up the slack. I think the "flight to quality" theory is also valid, there are a lot of mediocre houses on the market and people still end up competing for the very best ones (in terms of price vs. quality/condition/location etc).

My personal perspective is that there are always going to be more people who want to live near Boston than there is available quality housing

And that's why the number of sales has plummeted?

Mansfield... Anyone know anything about Mansfield...

Many of these towns that have decreased sales volume but increased prices are generally reputable and desirable regardless of economy. Those who can afford a higher end house during the boom are generally not as affected by economic downturns and thus have little incentive to change their spending habits. Towns that are typically considered more blue-collar and have more low- to mid-range type houses are going to see an even further drop because the people who would normally buy those houses are the ones being hit hardest by the current economy.

This article is VERY DECEPTIVE.

The median single-family sales price is affected by "tear-downs". Needham is king of the "tear-down". Over time, modest houses are being demolished and McMansions are being built in their place, resulting in higher median single-family sales prices.

I would like to see the median single-family sales price ADJUSTED FOR THIS EFFECT. If you compared comparable house sales between now and a year ago you will see that even Needham has lost a little ground.

and it is young professionals (like me and my fiance) who were previously priced out of the market who are currently picking up the slack.

If prices have stayed the same or increased in these towns how is it that you are now not "priced out" of them? According to the report there is no "slack" (price declines) and no one is picking it up (lower sales numbers).

Here's something somewhat related that I've been wondering about: was there less overbuilding in the Boston area -- maybe because of tough zoning laws and a simple lack of space -- and is therefore less oversupply?

http://www.marketwatch.com/news/story/housing-slump-shaping-up-worst/story.aspx?guid=%7B2932BBD7%2D4139%2D4A56%2D9155%2DDA6941690F44%7D&dist=MostReadHome

"That said, he expects some markets to recover sooner than others. Boston, for example, has less of an inventory problem right now than Phoenix, he said."

And if that's the case, couldn't we expect things to rebound more quickly than much of the rest of the country?

Dan T is absolutely right.

This article is misleading. Imagine a tear down in 07 being sold to a builder for $500k and then the resulting new home being sold for $1.5M in 08. It would only take a handful of these to make the year-to-year median single-family home sales price statistics meaningless. Needham is the king of the "tear-downs". The houses being sold on average in 2008 are not comparable to the houses that were sold in 2007. They are bigger. So I am growing weary or articles like this and implore readers to stop and think every once in a while.

Another cut of the raw data shows that the dollar volume (home sales * median price) of the market fell in every town except Winchester and Woburn - increases of $13MM and $6MM respectively - from YTD '07 - '08.

Why is Winchester bucking the trend? Are people trading Arlington for Needham ($40MM drop in dollar volume)? Is this representative of the Mass Affluent / Costco generation trading up?

I would like to see sales numbers by price cohorts. Regardless, in those 15 communities, the dollar volume of homes that traded is off at least $116 MM in 08 vs 07. (For all you real estate agents, that is drop of $5.8 MM in commissions.)

If Binyamin's table is the rosiest picture, residential real estate is in a world of hurt.

"And that's why the number of sales has plummeted?"

Correct me if I'm wrong, but the number of sales has plummeted (and will continue to do so) from tightened lending standards, not that people have all the sudden decided that they don't want to live near Boston?? Or, after 300+ years as

If an affordable house came on the market in my Brookline neighborhood and I could actually qualify for a mortgage in todays market, you better believe I'd jump on it.

Mansfield offers quick commuter rail service into Boston (as does Sharon). Very nice when gas prices are high!

Municipalities should take notice here. The cities and towns that are weathering the storm to date have good public schools and that is why they are surviving in this market.

-People want to be close to the city and have access to good schools and public transportation. With gas prices high I think it makes real estate in these towns more desirable. I would certainly acknowledge the lessening activity but there are enough transactions to show that the market in these towns is fairly rational. We have not had the overbuilding like markets in California, Florida and Las Vegas. I am hearing anecdotally of prices in Needham as being relatively firm. If you can swing it would you rather be in traffic with $4 gas and higher or taking boat or commuter rail and be home in 30-40 minutes...??

There hasn't been overbuilding here in MA because it is so difficult to build and because it seems like almost every square inch of buildable land is developed. Since it is so difficult to build in MA, builders will tend to do more expensive projects but fewer of them. It costs the same to go in front of the CONCOM and the Zoning Board of Appeals for a 450k project as it does for one priced at 1.4M.

When you compare what you get for 350k in most of the country with what you get in Eastern MA, it is a joke. This is one reason why MA may actually be losing population, which is somewhat unprecedented. I believe most people would have a better quality of life if they left MA. Availability of affordable and good housing makes a huge difference in quality of life. The problem is that there are a lot of people in MA that earn a lot of money and there is a relatively small housing stock.

Correct me if I'm wrong, but the number of sales has plummeted (and will continue to do so) from tightened lending standards

The slowdown in sales and fall in prices began three years ago, long before credit tightened. And standards didn't tighten just for the fun of it. Lenders began to realize they had been giving money to people who could not pay it back. Meaning, the homes they bought were never worth what they sold for.

And to another point: Homes aren't widgets, and inventories aren't set simply by the amount of new building. Mass has indeed had a fair amount of new construction in the bubble, considering the fact that it lost population.

Just look at the latest MCAS scores at all levels in all subjects if you want to understand why WInchester housing prices are up. Add the rising cost of gas and the appeal of a town with two commuter rail stops is even greater.

Winchester houses are way too expensive!!! To date, most Winchester home owners have been stubbornly refusing to lower their asking price. This is why the number of houses sold this year is down 7.5%. Eventually reality will reach Winchester and prices will start to fall.

Winchester has two commuter rail stops and that does attract buyers to a certain extent yes that is true but look at towns like Weymouth which are more affordable have 3 commuter rail stops and a commuter Bus stop, yet that town isn't "weathering the storm" in the same way, granted Weymouth public schools ARE less than Stellar so I would presume that the reason Winchester is doing so well IS because of the quality of their public schools versus their "commuter rail" access.

Any reason you didn't give the overall numbers for May -- just a few selected towns?

Isn't it clear that what would ordinarily be called a change in price, the difference between what a home would have sold for this year compared to what it sells for now, has nothing to do with these median price changes?

Does anyone really believe any of the people who bought houses in Winchester a year ago can sell those same houses for a 34% profit? Or a 24%, or even a 14% profit? Of course not. Of course not! OF COURSE NOT!!!!!!!!

Obviously, obviously, obviously, the median price changes by town have very little to do with the change in price of individual houses, and more to do with a change in the mix of houses sold, which in turn is caused by complex economic factors as well as random fluctuations.

Binyamin, this line of reasoning should be familiar to you by now. If you agree with it or disagree with it, it would be helpful to take a couple of paragraphs to explain it and address it head on, preferably in the blog post itself. Without that guidance, these blog entries have become a painful, repetitive interchange between those who assume there are areas of immunity from the housing crunch and those who try to correct them.

May I also suggest a blog post dedicated specifically to the subject of "hot spots", since people seem so interested in them they turn many blog posts to that subject. There, people can propose where they think the hot spots are, backed by resale data from the registry of deeds. Certainly, if there are hot spots, they should be easily identified by the real estate agent who work them every day.

I find it shocking that the city of Woburn is continuingly making this list month after month. Woburn is traditionally more of a blue collar town than white collar. I wonder if people are realizing that Woburn is a bargain compared to other over priced towns like Winchester and Lexington. Any thoughts?

Mansfield is a reasonably priced town with a nice/bustling town center. The schools are decent, there is a strong sense of community, the commuter rail has express service, and there are a wide range of properties (old, new, neighborhoods, etc.). Big box stores have recently moved in at Mansfield crossing (Best Buy, Kohl's, LL Bean, Borders, Ann Taylor Loft, etc). There is also a large office park. It sits at 95 and 495 which is easy if you are a driving commuter for 128 or even down to RI.

So, if you don't mind a longer commute to Boston or 128 and are looking for affordable housing in a nice town, Mansfield is a good option. Other towns like it would be North Attleboro and Foxboro. All are comparable and little known gems.

Mansfield has come a long way. Consider the fact that it has a commuter train in the morning that is express to boston, it has a new outdoor shopping mall called mansfield cross, it has easy access to highways if you need to drive, it has the Tweeter (sorry, now called Comcast) Center, great schools, still affordable and is a few minutes to Gillette Stadium and only 35 minutes to the Plymouth Beach....not to mention you're close to providence as well as Boston so both towns are available easily to go out and dine, etc. My wife and I moved here as young professionals and I walk to the train in the morning. It's heaven when you're young and starting a family.

Thanks for the info on Mansfield. I am a first time homebuyer looking with my fiance we are both 27 and do allright in the $110k combined area. We are just nervous about buying today when a year or 2 we maybe down 10 or 15% from here... The reason I was curious about Mansfield was because I work in Westwood and it doesn't seem to far of a drive. I did some homework on MCAS scores tonite and found that Mansfield is top 10% in English and top 18% in Math for the High School, very solid.
A question I have is how much house should I buy (we were thinking 270-340 range. We would spend on the high side of that range if we found a house we could be in for 30 years.... Any thoughts would be great. Thanks.

Any

Jack,

I wouldn't get worked up about seeing Woburn on the list. I think the notion of "immune" areas has been pretty much been debunked. What rational or even irrational person would pay twice as much for a similar /comparable property just because of a line drawn on a map....

What this article should show is not the median price but the price per sq ft as this reflects information that is of value like the number of sales yr to yr.

I’m sure that just as the yr to yr sales in most towns are falling the price per sq ft is also coming down. The median price can be very deceptive as has been pointed out and a couple very expensive home sales can skew the number to the point that is meaningless.

Hard Rain,

I would gladly pay significantly more for a comparable house because of a line on a map. That line defines the schools my kids attend, the taxes I pay, and a host of other issues. I don't agree with the analysis above as it needs to address volume within price bands, but in MA, the line on the map makes a big difference.

I find it shocking that the city of Woburn is continuingly making this list month after month.

You shouldn't. Binyamin uses the same data month after month. These are year-to-date figures. Meaning, you do an analysis on January data, and publish results. Then, you use January and February data, and do another report. Not surprisingly, it's similar to the January report, because half of the data comes from January. Next, you use January, February, and March. And guess what, the results look similar. Of course some towns show up month after month, because he's counting the same sales over and over.

the realtors and real estate promoters can put whatever spin they want on today's market.The reality is that this will go down as the worst ever real estate market.This long overdue correction is still in its' infancy.I will wait, like many others , on the sidelines until this correction runs its' course.Prices are still WAY too high in the Boston area compared to nationally.As evidence of the sellers believing that we're still in the party market of 2005(outrageous asking prices still abound), i offer you this example-i have seen a multi-family for sale in Stoneham and watched its' sale price drop from 459K to 369K very quickly.This property is still for sale last i checked.There have been many other properties which have seen huge reductions and still have seen little buyer interest.This real estate bubble which was created by Alan "Bubbles" Greenspan will end as badly as the Nasdaq equity bubble

Mansfield also borders Easton ,which was awarded #48 in Money Magazine top 100 towns to live in the country

Averages are not an accurate barometer...one or two sales can shift trends significantly. How about looking at sales prices vs. assessed valuations? Then compare the results year over year. May give you very different results. I just don't think the averaging data is accurate. If you want to stick with averages, then I would tend to throw out the top and bottom 5 sales to eliminate the houses that may skew the results in one direction or another.

Jim - Nobody believes this is a party market. Nobody. Not realtors, not builders, not buyers, not sellers, nobody. That said, running around like you are shouting that its going to be the worse market ever and will forever get worse is unproductive and uninformative. It is actually analogous to 2004, when others said prices will be going up and up forever. Its amusing how the bulls and the bears mirror each other so much.

Things are usually never as good as they seem, or as bad as they seem.

Check out the high school rankings at Us New and World Report. Families with school age children use data like this to determine where they want to live and buy property.

http://www.usnews.com/sections/education/high-schools

Marcus,
"You shouldn't. Binyamin uses the same data month after month."

While your comment is true, it doesn't totally disprove YTD analysis. If you consistantly see towns show up month after month in YTD, you can still reach the conclusion that the data is consistant unless you discover one or sevreal outrageous sales in the first month that buffers all the deficits throughout the year.

Dan, Dan, Gus, Allan, Fred et. al.,

So your complaint is that these sales figures don't show the rise or decline in the value of individual homes, and that shifts in the mix of properties may be distorting the picture? Well, you're in luck. The S&P/Case-Shiller index looks at individual properties, and compares their past sales prices to their most recent sales prices.

The results for April are newly posted (and that's the main reason it isn't the standard gauge; it's more accurate, but it lags the other indicators by a full month). Nationwide, the twenty-city index was down 16.3% on an annual basis, and -1.4% from March to April. Boston, on the other hand, is down 6.4% over the past year, and actually eked out a tiny gain - 0.1% - since March. (For what it's worth, it appears that the distorting effect is the opposite of what most posters have suggested - failing to adjust for individual properties paints an overly gloomy picture. The Warren Group put the annual decline in April at 12%, and the MAR at 15.8%. So an educated guess would be that the present mix of properties on the market is heavily weighted toward lower-priced homes. And that makes sense. Those who can afford to wait out the slump will; it's those with less substantial assets who may find themselves forced to sell.)

In other words, there really is something anomolous about the Boston area. As innumerable postings on this blog have pointed out, there were fewer high-risk loans and a dearth of new construction in the area, and the local economy remains fairly strong. We're not Charlotte (down 0.1%) but then again, neither are we Las Vegas or Miami (both down more than 26%).

Make of that what you will. Jim contends that it's evidence that Prices are still WAY too high in the Boston area compared to nationally. That they're relatively high is incontestible; that they're too high is either a moral judgment or an economic claim. As an economic claim, it doesn't seem to hold much water. The truth is that Boston is not immune from the downturn, and that prices in the area are declining. But that decline is much, much more shallow than the national average, and seems likely to stay that way for the foreseeable future. And it's extremely uneven - as the map illustrates, relatively affluent towns with good school systems and proximity to high-paying industries have seen their rate of appreciation dip dramatically, but continue to see either small gains in overall value or extremely shallow declines. On the other hand, decaying industrial cities, many of which had a brief taste of revitalization during the boom, are bearing the full brunt of the credit crisis and market decline. That's well-worth noting, it seems to me.

Why is the downturn unlikely to continue in Boston? I agree its not a moral issue, its a math issue. And I continue to think that Boston will continue to go down until the historic ratios are re-established. Historic for Boston that is - no need to say Boston isn't Vegas - while true, better to compare boston to boston.

I do think Boston will decline less than places like Vegas, without a doubt. But that's not to say we won't see some pretty significant declines for the next year or so. Regression to the mean is a powerful force.

Middle,

Stop talking sense. Armageddon is upon us, everyone run for their lives.

Teabin

Matt: In regards to mansfield, we bought at $365K and got 2,000 square feet and three bedrooms in 2004; you can probably get that now for $350K

Also Mansfield was named a top 100 town itself the year before Easton was, they must have re-calibrated their formula and it shifted one town over!! Mansfield was on Money Mag's 2005 list.

Allen,

"median price can be very deceptive as has been pointed out and a couple very expensive home sales can skew the number to the point that is meaningless."

It would take roughly 10% of the home sales to be in the "very expensive" range (+2 SD) for skew to show up in the median. My guess is that the average sale price in these cities is also higher i.e. the houses that are selling are ALL in the higher price range when compared to last year. If the average and median are both up, that is one indication that this is the case. In neither case can you say individual housing prices are up or down. Only sale pair methodology can tell that.

Fred,
"Averages are not an accurate barometer" - True, but Binyamin is reporting on medians. Averages can tell you if where the outliers are when compared to the median.

Cynic,
"continue to see either small gains in overall value or extremely shallow declines." - The value of individual houses is debatable. It is irrefutable that the total dollar value of sales fell yoy - except in Winchester where it increased 24%. Either prices increased or Winchester sold a disproportionately higher number of higher priced homes compared to '07.

Don't forget, a lot of people are selling their big homes and downsizing, so many of these homes would have sold for 1.5-2.0m 4 years ago are selling for less, just more on the market. look at $ per square foot verses 4 years ago.

I've been using my home equity in Winchester to buy up all the property in town with interest-only mortgages with the expectation that I'll be able to sell these houses a year from now for a tidy profit. I don't really expect to make 34% year-over-year indefinitely but I'll be happy with 25%. It sure beats working for a living.

Seems like the doomsayers are determined to believe that the market must go down for years and any data that even hints at stability or increasing prices is deceptive. Medians, averages, any measure of housing prices is going to have some inconsistencies but it's about all we have and it should at least give you an indicator. You can just as easily argue that the lower prices could be a reflection that this year less expensive homes have been sold as arguing that it's just some bigger houses selling that are skewing medians up in these towns. I'm not saying either is the case, but ranting and raving that these stats are deceptive doesn't really mean much.
I live in one of the towns that has seen price increases according to this data and I can say at least annecdotally that the housing market here has been surprisingly strong. Just about every house that came on the market this spring in my neighborhood sold within a matter of a few weeks. There were bidding wars on some houses with houses selling at or very close to asking and for more than when we bought 18 months ago.
All real estate is local. I dont understand why people are so upset at the notion that prices will go up in some areas and down in others, just like when prices were going up everywhere the fastest growth was not in these towns. Obviously the housing market is not as strong as it was a few years back. We can just look at a general headline that 'prices are down' and not learn a whole lot or we can do this kind of analysis and look for some of the interesting underlying or counter-intuitive trends.

Yes, the housing market in some areas are very hot. We went to dozens of open houses (condos and entry-level SFH) during the past several months. Arlington attracts much more people than any other places. Especially for condos, the asking price in Arlington is about the same or even higher than the comparable condons in Newton or Belmont. To our surprise, even with higher asking prices, those condos were sold with only a few days on market. We think that Arlington is over-heated and the high price won't be sustainable, but the condos there keep selling very fast. Is that a bubble waiting to happen? Should we stay away from the hot areas? Or as suggested from the previous posters, can we still make a profit in a few years by buying a condo in Arlington?

Resale value is what you must always have your eye on. When I bought my Mcmansion in Easton 5 years ago I had a contingency to sell my former house in Stoughton. I had competition with another prospective party who was trying to sell their Mansfield house. Both houses were very similar. My Stoughton house sold in first open house, showing for asking price. The Mansfield house had to settle for an addition over their garage.

Who is determined to believe the market will go down for years? Sounds like a very poor method of analysis.

Personally, I think determination and belief should play no role in analyzing an investment - math and due diligence is far better.

Of course those of us who care about math, and being correct, will analyze the heck out of the statistics.

Things go up, things go down. That's the business cycle. Understanding where one is in it is analysis. And up or down makes no difference, I make money either way, as long as I call it right.

It's interesting to see how many people get emotional about it, and ascribe their own approach to others. Really useful data in understanding certain errors in my projections - why things are "stickier" than I projected. I'd expected the slump to start seriously in 2005 and be over by now. Reading this blog's commentary has helped me a lot with stock market projections.