“Housing Market Bubble Deflating”: really?

OK Marbleheaders, confess: you didn’t know you just lived through a housing bubble.

Maybe you got confused by the facts: only one house has sold this year for more than $1.8 million while there are 29 for sale at that price or higher; the median price for the first 9 months of the year was up 5% from 2012, but down 2% from 2011 and is still down 9% from the peak in 2005; after sales of SFHs of 22-30 each month from April to September, sales in October are likely to be around 10.

Fact, facts.

I attended a webinar this week in which the hypothesis was expressed that having the best data was the key to success. To that I would add being able to understand and explain the data.

As somebody who writes regularly on data and relies upon it as the foundation for my comments I get amused and frustrated in equal parts  by the headlines that come into my inbox every day from my Google alerts. I can pretty well guaranty that I will see conflicting headlines such as “housing bubble” and “housing slump”. The quote in the title of this blog came from a headline this week.

Buy my favourite headlines of the week was:”housing market to fall 50-60%”. Wow! Quick, better cut the price on all homes for sale. Oh, wait a minute, the article referred to the Ukraine, and was referring to the number of sales, not the price. I guess we all know that the headline writer’s job is to get people to read the story, but truth in headline writing occasionally would be quite acceptable to most of us.

Having discovered that the article referred to the Ukraine, I can relax and go back to worrying about the budget crisis, debt ceiling and dysfunctional Government in this country. That feels better. Or not.

Those of you who know me will be aware that my new thing is MOOCs – Massive Open Online Courses. I am taking Wharton MBA classes online free. Check out https://www.coursera.org/course/accounting.

A revolution is hurtling down the pike in education. If you don’t believe it consider this: since its founding in 1881 Wharton has produced 92,000 alumni. Its Introduction to Financial Accounting course on Coursera has more than 130,000* had signed up. That’s more than the number of alums of 132 years. Astounding.

And as the Carpenters sang in a different context many years ago:”We’ve only just begun”.

When I wrote that bit about MOOCs yesterday I know I had a link to real estate in mind, but today I can’t figure out what it was. Oh well.

Back to real estate. As I have documented – with supporting data – there have been two major trends in the Marblehead market. First, the market under $500,000, which for several years was the weakest segment, appears to have worked through the volumes for sale and now is suffering from a severe shortfall.

That makes sense. Homeowners in this segment were often young with limited other resources and were the most immediately vulnerable to the super recession. Conversely, as the economy has stabilized, this segment is seeing demand from those who survived the recession and want to take advantage of lower prices and ultra low mortgage rates.

The second trend has been the really low number of sales at the higher end, at least in Marblehead and other North Shore locations. This one is harder to fathom. It has been said many times once people move to Marblehead they tend to stay and when they move house buy another one in town. “Trading up” is a well established practice, but seems to be almost totally absent from the market this year. Why?

While several hypotheses have been expounded – from simple supply and demand to the reurbanization of America to the time it takes to spread out from the centre (Boston) – no one I know has come up with a convincing explanation.

So I shall keep searching.

And I shall be sure to let you know when I spot a bubble.

* I have corrected this number from the original posting

If you are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or [email protected].

Andrew Oliver is a Realtor with Harborside Realty in Marblehead.