Marblehead condo market 2012 review: apples and oranges

Any claim that “the condo market” in Marblehead is doing this or that should be treated with caution.

As I have commented many times, there are two main condo markets in Marblehead: purpose built condos like Glover Landing, Adams House, Oliver’s Pond, Marblehead Highlands, etc; and old 2/3 family houses that were ‘condo-ed” in the boom years.

The former category has seen prices hold up well, while the latter has suffered. And the overall market is so small that very often there are large price gaps between sales, making median prices even less meaningful.

Nevertheless, by digging deep into the numbers I can explain what is actually happening in the market, and it’s not what the headline number suggests.

So let’s get to the numbers.

First sales, which seem to have stabilized at around 40 per year, down sharply from levels of a few years back:

Now prices. The raw data shows that the median price moved up in 2010 and 2011 before dropping sharply in 2012.

Because that does not tally with what realtors say actually happened in 2012 I have looked at some other data to try to understand what lies behind the numbers. As with SFHs it seems that there was a shift in the mix of sales in 2012. A bigger percentage of sales took place at lower prices and it was this that caused the overall median price to drop.

Let’s look at the ASR, the ratio of Assessed Value (AV) to Sales. If the AV is higher than the Sales price, then the ASR is above 100%. Conversely, when the AV is below the Sales price, the ASR is under 100%.

In recent years, the ASR has been above 100% for condos up to $300,000 and below 100% for condos above $300,000. Here are the numbers for 2011 and 2012:

In 2012 the ASR dropped more than 5% for condos under $300,000 and rose 3% for those above $300,000. Overall, the ASR declined slightly.

Remembering that an ASR below 100% means that condos are selling above assessed value, a declining ASR is usually a sign of a market going up, not down.

It’s important to be aware that the data I use is the AV at the time of sale, when the actual AV reflects sales data from an earlier period. Nevertheless, the ASR data strongly suggest that prices did not actually decline in 2012.

What other numbers can help?

I have published before a breakdown of sales below and above $300,000 and include here the year end numbers. Again, as the percentage of sales below $300,000 increases so the median price overall decreases. And vice versa.

To try to make this easier to see, I have included a table showing a more detailed breakdown of sales by price.

MHD Condo sales by price

Eureka!

Between 2011 and 2012 the percentage of sales below $300,000 increased from 46% of the total to 57%, thereby putting downward pressure on the overall median price. But within the under $300,000 category, there was a major shift from the $200-299,000 range to the $100-199,000 range. In 2011 just 3 of 13 sales (23%) took place in the $100-199,000 range, but in 2012 this jumped to 12 of 20 (60%).

So in 2012 there wee two factors at work: a bigger percentage of sales occurring below $300,000; and within that bracket also a shift to lower priced sales.

Result? A decline in “the condo market” median price, despite the fact that other indicators, such as the ASR, suggested a gently rising market.

And now the coup de grace: look at the median price below and above $300,000.

While the median price for condos below $300,000 has fluctuated over the last few years (and, as with SFHs, 2012 likely saw a clearing of the market with first time buyers and investors competing for low priced units), the median price for condos above $300,000, largely the purpose built market, has shown a steadily rising trend.

Looking into 2013, there are currently just 16 condos available for sale, with only 6 of those under $300,000. Inventory is always low at this time of year, but with growing awareness both that the housing market generally is recovering and that record low mortgage rates may not last for much longer, it would be no surprise to see prices move up in 2013.