Marblehead First Quarter Housing Market

It’s over. We survived. Hallelujah!
So how was the housing market in Marblehead? First Single family Homes (SFHs):

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

Wait a minute. The median price dropped almost $50,000? What’s going on?

What’s going on is the mix of sales, as per this table*:

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

In 2014 the median sale was the average of the 14th and 15th sales, i.e. the 5th and 6th sales over $500k. In 2015 the median was the 18th sale, the 4th over $500k. Now let’s look at those sales:

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

Note the way the sales prices in 2014 in the $500s quickly jumped to the high $500s. There were therefore two factors at work in 2015: more sales under $500,000, and the lack of sales in the low $500s in 2014.

Going back to the first table, I have added the ASR (Assessed Value to Sales Price Ratio)**. As explained in the footnote a falling ASR is an indication of rising prices, especially when Assessed Values themselves are increasing. The drop in the ASR confirms my belief that the fall in the median price is an indication of the mix of sales, not an indication that prices were falling.

Condos
My usual policy is not to comment on quarterly numbers for a market as small as Marbehead condos, but the numbers in Q1 2015 do provide a useful lesson in understanding how median prices work. let’s look at the numbers:

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

Holy mackerel! Prices are collapsing. Man the lifeboats.
Hold on there. Let’s look again at the mix of sales:

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

This very clearly demonstrates the change in the mix of sales with so many taking place below $250,000 in 2015.

The message
I hope the above commentary explains that a change in the median price can occur either because of a change in underlying prices or, as was the case in Q1 2015, because of a change in the mix of sales. The important thing is to make sure that when anybody quotes median prices they have done the analysis to know the reason for a change rather than just quoting numbers. And remember the law of large numbers – the larger the number the more reliable the data.

Does this tally with other indicators?
My rather lengthy explanation of what happened in Marblehead in Q1 assumes that Marblehead did not reflect the broader – and much larger – market.
Let’s take a look at Essex County and Massachusetts as a whole.

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

Source: MLS, Oliver Reports

The message from these numbers is that SFH prices continued to increase in both Essex County and Massachusetts, while condo prices were steady to down a tad.And that Marblehead’s numbers were an anomaly. Again, just one quarter – and a cold and miserable one at that.

Conclusion
My conclusion is much the same as it has been in recent weeks: low interest rates, low inventory,good demand = a robust housing market for the rest of 2015

*Whenever I refer to median prices in my reports I exclude distressed sales – i.e. short sales and foreclosures. Please contact me if you would like an explanation of this treatment, which is based upon many studies of the discount at which such sales take place compared with the regular market.

** One of my consistent themes is that the ratio (ASR) of Assessed Value (AV) to Sales Price (SP) can give a good indication of what is happening to underlying prices. If the ASR is above 100%  that means that properties are selling for less than their AV. Conversely, properties selling above their AV will have an ASR below 100%.

As we all hope out properties are worth more than the AV we look for an ASR below 100% as a positive sign. Remember that AVs are a lagging indicator: the tax bills for the current FY2015 are based on actual sales in 2013.

What this means is that in a period of rising prices the ASR is likely to be falling. The ASR is the AV divided by the SP: if the SP is rising (prices going up)the ASR will fall.  So what we, as homeowners, want is an ASR below 100% and falling.

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

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