(Click here to download a pdf of this report.)
In 2017 the median price of the Single Family Homes (SFH) sold in Marblehead increased by $45,000, or 7%, to $665,000, a new record high for the fourth year in a row. As in every year since 2000 except 2010 and 2011, the median price was higher in the second half of the year than in the first half, breaching $700,000 for the first time.
Sales were down only modestly, despite the low inventory all year, while the number of SFHs for sale on average dropped about 25% from the levels of the two prior years, and by 45% compared with 2014.
It is important to bear in mind that only around 4% of Marblehead’s more than 6,200 SFHs change hands publicly in any year, but 4% is a reasonable sample, with sales taking place from $290,000 to $5.8 million.
The first chart shows median prices since 2000. I find it helpful to look at longer term trends and this chart shows how prices – which had already risen for some years prior to 2000 – jumped sharply in the early years of the millennium, dropped during the Great Recession, recovered, and have now hit new highs for the last 4 years. Below the chart is a table of prices since 2000.
The second chart shows the median price for the two halves of the year and for the full year for the last 5 years. The second half of 2017 saw a significant upward movement.
The next chart shows how the market can vary from quarter to quarter. In the last 5 years the highest quarterly median price has been recorded once in Q1 and twice each in Q3 and Q4.
Despite all the (accurate) stories of the lack of inventory throughout 2017 sales were down quite modestly and have been more or less flat for the last 5 years, recovering from the slump of the Great Recession, but still not back to the levels of the peak years. There is no doubt that lack of supply has been holding back sales.
Sales by price
The table shows the breakdown in sales by price for the last four years.
Within basically flat total sales there have been major shifts. 2017 saw a sharp drop in sales in the $4-600,000 range, while sales increased in all brackets from $600,000-$1.5 million. 2017 also saw 2 sales at $5.8 million, the highest ever recorded in MLS.
Houses For Sale
The seasonality of the number of houses for sale largely disappeared in 2017 – the traditional spring pick-up in inventory failed to materialize. The fact that total sales were down only slightly despite the low inventory implies that houses were generally selling more quickly than in prior years.
We start 2018 with just 24 SFHs for sale and 15 of those are above $1 million. The cheapest SFH listed is $519,000 and there are just 3 under $700,000.
Assessed Value to Sales Ratio (ASR)
One way I measure prices is by the ratio (ASR) of Assessed Value (AV) to Sales Price (SP). The ASR is the AV divided by the SP: if the SP is rising (prices going up), the ASR will fall. In a period of rising prices the ASR is likely, as a lagging indicator, to be below 100%.
As we hope out properties are worth more than the AV an ASR below 100% is a positive sign. Remember that AVs are a lagging indicator: the tax bills that have just been sent out for FY2018 are based on actual sales in 2016. Thus the 2017 sales data, reported in this review, will be the basis for FY2019 assessments. And my data compares 2017 sales with AVs based upon 2016 prices.
Let’s look at the ASR in recent years:
For the last 4 years the ASR has been around 90% or below, indicating that the median sale has been taken place at about a 10% premium to Assessed Value, despite the increases in Assessed Values.
Outlook for 2018
Immediately after the 2016 Election I published What does the Election mean for real estate markets? in which I made the bullish case: “The removal of a lot of strangling regulations and the end of gridlock in Congress will produce stronger economic growth. Major infrastructure spending will boost jobs and wages at the lower end, while lower corporate tax rates and lower personal tax rates will produce increased personal wealth. Interest rates will rise, reflecting the stronger economy, and the demand for housing will increase. Greater wealth and confidence will provide a boost to the higher end of the market.” I concluded:”I have no doubt that 2017 will provide many surprises along the way, but with a stronger economy and low supply of houses for sale, there seems little reason for home prices in Marblehead not to continue their steady, but modest, upward movement.”
Um, well we got many surprises…..and some of the economic progress, and prices increased perhaps more than modestly. As for 2018? There are a lot of variables, particularly as people in States like Massachusetts try to figure out how they come out with the tax changes. The economy may well grow at a faster rate than in recent years, which would place upward pressure on interest rates and mortgage rates, while it is hard to see at this stage what will increase the supply of houses for sale.
Here are the new listings for the first full week of 2018:
Property tax rates for FY 2018 for all 34 cities and towns in Essex County have been announced. Below is a map (which you can download by clicking here),
so that you can compare tax rates in neighboring towns, followed by the tax rates for each town the last four years, listed from low to high using 2018 tax rates.
Median and Average Tax Rates
The median tax rate for 2018 is $14.30, down slightly from 2017’s $14.41, while the average tax rate has dropped from $14.41 to $14.17. The highest taxed town, Amesbury, has a rate 34% higher than the County average, while the lowest, Nahant, is 29% below the average. Or put another way, the highest tax rate in Essex County is 88% higher than the lowest.
How property tax rates are calculated
There are two main points to understand:
The dollar amount raised by property taxes is based on a simple formula: the dollar levy for the previous year plus 2 1/2% (Prop 2 1/2), plus any new growth (e.g. new construction), plus any voter-approved overrides or debt exclusions.
The tax rate is then calculated by dividing the dollar amount to be raised by the Assessed Value of all property. For FY 2018 (July 2017-June 2018) Assessed Values are based upon sales during 2016. Sales in 2017 will be used for calculating the FY 2019 tax rate.
Thus, the dollar amount (and tax bills) will usually increase from year to year, but the tax rate depends upon what happens to Assessed Values (AV).
Here are examples. All assume a 4% increase in the dollar amount to be raised from taxes. The variable is the change in the AV. In the years when AVs are declining, tax rates will rise. As AVs are now increasing we should expect to see tax rates flat to down, as they are overall for FY 2018 .
Tax rate changes in 2018
Of the 34 cities and towns in Essex County, 21 have announced decreases in their tax rate while 13 have had increases approved.
The largest decreases were logged in Rockport and Swampscott, while the largest increases were in Rowley and Andover.
Tax Rates of Neighboring Towns
Where taxes become interesting is when one can compare tax rates in neighboring towns. Many people, especially those moving to the area, whether from Boston or elsewhere, are willing to consider more than one town.There are many factors in the decision about where to live, but tax rates can be a significant influence on the decision, and may become more so with the new limitation on the deduction of property taxes from Federal taxation.
Note, for example, that the tax rate in Marblehead (read How is Marblehead’s 2018 Property Tax rate calculated?) is lower than in Swampscott (read How is Swampscott’s 2018 Property Tax Rate calculated?); the rate in Newbury is significantly lower than in the surrounding towns; and that the rates in Boxford, Topsfield, Hamilton, Wenham and Essex are much higher than in the surrounding towns. Some argue that lower property values offset higher taxes. Frequently, however, residents of highly taxed towns cite taxes as a reason for wanting to move.