Case-Shiller: Boston Home Prices Decline Slow & Steady

Time for a monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI).

For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – October data is released in December).

Here are the basic Case-Shiller stats for the Boston area* as of October:

October 2008
Month to Month: Down 1.1%
Year to Year: Down 6.0%
Change from Peak: Down 12.8%

The following chart shows the Boston HPI scaled such that the September 2005 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Boston HPI was at or lower than it was in the latest data (January 2004).

Boston’s seasonal cycle continued on the down side in October, coming just short of marking a new post-peak low for the index. According to the latest data, two years of home price gains from 2004 to late 2005 have been erased in the three years since the peak.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Boston’s performance to other areas across the country:

And here’s one more chart, in which I have lined up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

Boston’s far earlier peak in home prices seems to have spared it the more extreme price drops that have been seen in other markets, as home prices here continue to decline much more modestly. Many other markets are currently seeing month-to-month price drops in excess of 2 percent, while Boston’s is only half that.

Is the bottom in for Boston home prices? It doesn’t look like it, according to this data. I’m going to stick with what I said last month, and predict that the earliest we’ll see even the seasonal increase in prices is Q2 next year.

*[Case-Shiller defines Boston as the entire Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area, which includes all or part of the following counties: Essex MA, Middlesex MA, Norfolk MA, Plymouth MA, Suffolk MA, Rockingham NH, and Strafford NH.]

Biggest Discounts December Update

Let’s have an update on where buyers are currently getting the biggest discount off the asking price. This data should help potential buyers to know which neighborhoods are softer in terms of sale price discounts off list price, better equipping you when making an offer and helping you know where to look for potential bargains.

In the charts below, we have taken all sales data from the last two and a half months in Redfin’s Boston coverage area and sorted it by zip code. We calculated the overall difference between the sale price and the list price. Note that this reflects the final list price, after all price drops in the listing. Any zips with fewer than ten sales are excluded from the top and bottom ten rankings, but interested readers may download the full data summary in Excel format (xls).

Here are the top ten zip codes with the largest overall discount:

Last month only three zips had overall discounts at or over six percent, while this month seven zips came in at that level, with the top two peaking above eight percent. Not bad for bargain hunters in Roxbury (02119).

The overall discount for the Boston area increased from 4.5% last month to 4.9% this month, indicating a slightly increasing willingness of sellers to bargain with buyers.

Here are the ten zip codes with the smallest discounts:

Of the 846 sales we tracked in the 2.5-month period, 30 homes sold for more than 20% off the asking price, while 81 homes sold for more than asking.

As a whole, the trend is currently moving toward larger discounts for most neighborhoods. This could very well be a seasonal effect. As we continue to watch this data we will be able to get a better picture of what sale-to-list discounts tell us about the overall health of the local real estate market.

City/Town/Neighborhood December Price Reduction Update

Let’s take another look at which cities and towns have the most price reductions.

The following charts show the percent of MLS, FSBO or REO listings that were price-reduced at some point before leaving the market (either sold or removed unsold from the market) in the past 90 days. Cities/towns or neighborhoods in which the number of homes taken off the market was too small to provide believable estimates are excluded from ranking.

For those that are interested, I have uploaded the full data set in Excel format here. In order to keep from overwhelming you with charts, I am leaving out the top ten cities/towns/neighborhoods with the least reduced-price listings from the post, but you can still see that chart in the downloaded file.

First up are the top ten cities with the most price-reduced listings:

Of the 206 cities/towns we ranked in the Boston area, 135 (roughly two thirds) had price-reduced ratios of fifty percent or more. Topsfield, Ayer, and Merrimac all made the top ten last month and this month, with a consistently high volume of price reductions.

Getting a little more granular, let’s look at the top ten Boston area neighborhoods for price reductions:

18 of the 64 neighborhoods we ranked in the Boston area had a price-reduced ratio of fifty percent or more. Five neighborhoods—Telegraph Hill, River Street / West Street, Upper Washington, East Boston, and Logan Airport / Jeffries Point—all carried over from last month’s top ten as well.

On the neighborhood level (but not at the city/town level), there is a slight tendency for neighborhoods with lower listing prices (per square foot) to have a larger share of reduced-price listings. If you’re looking for sellers that might be more willing to negotiate a lower price, these would be the places to look.

Home-Buying Class on December 10, 2008 6-9:00 p.m

Hello All,

We will be having a special holiday home buying class this upcoming Wed. night.

We will discuss such topics as:

When to buy and why.

How to recognize a good deal.

Really cool Redfin stuff.

The buying process and you.

Mortgages, yeah, Mortgages…

and much more…

Please email me directly if you would like to discuss specific topics like areas, types of property, short sales, bank owned properties, home inspections, etc…

There will be plenty of good beer and great food from Dough East Boston  http://www.doughpizza.com/

Please follow the link to sign up and hope to see you all there!

http://redfin.pingg.com/BostonClassDec\

Thanks

Alex Coon

Market Manager

Case-Shiller: Prices in Boston Headed Back Down

While most of us were out enjoying the holiday break last week, the folks at S&P/Case-Shiller released the latest data for their home price indices, which provides the most accurate measure of single-family home price trends for twenty markets across the country. Since S&P’s coverage conveniently includes each of the eight markets that Redfin provides service in, let’s take a look at the home price data from the S&P/Case-Shiller Home Price Indices (HPI).

Before we get to the charts, let me give a brief explanation of what the Case-Shiller HPI is. To calculate the index, they look at repeat sales of single-family homes over an “arms-length” period of time. Home sales that include things like major remodels, property splits, and sales between family members are disregarded, and sale pairs are weighted based on the length of time between each sale. After all this, the current month’s data is used to calculate a three-month rolling average which is the reported HPI. Data is released on the last Tuesday of every month, for the period two months prior (i.e. – September data is released in November).

For a more detailed explanation of their full process, check out their methodology pdf.

Here are the basic Case-Shiller stats for the Boston area* as of September:

September 2008
Month to Month: Down 1.1%
Year to Year: Down 5.7%
Change from Peak: Down 11.8%

The following chart shows the Boston HPI scaled such that the September 2005 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Boston HPI was lower than it was in the latest data (February 2004).

Boston peaked earlier than any of the 20 markets tracked by Case-Shiller, and has also had one of the slowest declines, with prices falling just under 12% in the three years since the peak.

Home prices here have also not declined as steadily as they have in other markets, as there have been regular periods each year during the post-peak decline that prices have actually increased. With the latest data, it looks like the third such period is now over, and home prices are about to continue downward again, likely until Q2 next year at the earliest.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Boston’s performance to other areas across the country:

And here’s one more chart, in which I have lined up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

The first year and a half of Boston’s home price declines looked very similar to home price drops in other markets, but in the following 18 months, prices have nearly leveled off in Boston while they continue to tank in other markets.

The bottom line for Boston seems to be that while the market here is definitely soft, home prices have not fallen nearly as much as they have in other parts of the country, so if you’re a buyer out there today don’t expect to have an offer for 25-50% off peak prices be seriously considered by a seller.

*[Case-Shiller defines Boston as the entire Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area, which includes all or part of the following counties: Essex MA, Middlesex MA, Norfolk MA, Plymouth MA, Suffolk MA, Rockingham NH, and Strafford NH.]