Marblehead Mid-Year Housing Review: Recovery Continues
The market for Single Family Homes (SFHs) has been strong in the first half (H1) of the year at the lower and middle price levels, while the upper end continues to see an abundance of supply.
First, let’s look at prices. Here is a chart of the last 7 years. The numbers in the box are the median price in $thousands.
Source: MLS, Oliver Reports
Bear in mind that in late 2011 and the first part of 2012 there was a shift in the proportion of homes sold at lower levels, resulting in a decline in the median price overall. What we have seen in 2013, with a 6% increase in Q1 and a 11% increase in Q2, combining for an 9% increase in H1, is a continuation of the recovery in the SFH market as prices have returned to roughly 2010/11 levels.
After suffering declines year on year (YOY) for three consecutive quarters from Q4 2011 to Q2 2o12, the median price has now increased YOY for four consecutive quarters.
Source:MLS, Oliver Reports
The median price in the second half of 2012 was $549,000. Were 2013 to match that number then the year’s median price would be the highest since the $544,000 of 2007. The all-time high in Marblehead was $585,000 in 2006 so we are less than 10% below peak levels overall.
Sales in the first half were in line with last year’s numbers. 2004 remains an anomaly in this century.
Source: MLS, Oliver Reports
There is little doubt that sales in 2013 would have been higher had there been more homes available for sale.
I have made reference before to the stock market. When a market overall or just an individual stock suffers a decline and then reaches a level at which it is widely considered to be cheap, sellers frequently decide that they do not want to sell at that level. If buyers want to own the stock they have little alternative but to bid the price up until sellers are willing again to sell.
I think what is happening currently in the housing market is similar. The word is out that prices have bottomed and are rising. There is still activity, of course, as people move, trade up or trade down, etc. But an awful lot of people, having seen their largest personal asset decline in value in recent years, are happy to sit tight for now.
In recent weeks the 30 year mortgage rate has jumped from under 3.5% to over 4.5%, as the increasing evidence of a strengthening economy has encouraged the Federal Reserve to talk of slowing its policy of quantitative easing (note “slowing” does NOT mean tightening or increasing rates). This sharp move, together with the traditional post July 4 slowdown, may combine to produce a pause in the market locally, but all the fundamentals still point to prices heading higher in due course.
Another measure I use to gauge the market is the Ratio (ASR) of Assessed Value (AV) to Sales Price (SP). If the AV is higher than the SP then the ASR will be over 100%. Conversely, when houses sell for more than AV the ASR will be less than 100%. Put simply, the lower the ASR the greater the premium to assessed value.
Here are the numbers for the first half of 2013. I have broken out the numbers at different price levels.
Source: MLS, Oliver Reports
Key points are:
1. The overall ASR improved from 101.5% to 93.5%.
2. In the 0-499k price bracket the ASR improved from 105.6% to 99.3%. This is the price bracket that saw the most pressure and it has now been recovering since Q4 2012.
3. All houses $500k and above improved from 93.5% to 87.4%.
4. These ASR numbers support and explain the 9% improvement in the median price.