Marblehead house prices reach new high for first 6 months

The median price of a Single Family Home (SFH) in Marblehead reached a record level of $582,500 in the first half of 2014, narrowly beating the previous high of $577,562 in 2006. Note, however, that prices have not yet bettered the levels in the second half of both 2005 and 2006.

The median price for the full year in 2005 and 2006 was $584,000 and $585,000 respectively, so it would appear at this stage that 2014 will see us very close to prior peak levels.

Source: MLS, Oliver Reports

Just like the stock market, housing prices don’t go up or down in straight lines. Nobody gets too excited if the stock market falls a few percent in any given quarter, yet “experts” routinely express alarm when “the housing market” – of which, of course, there is no such all-embracing thing – declines or fluctuates from quarter to quarter.

The situation in housing is complicated because, unlike the stock market, only a very small percentage of houses – in Marblehead about 3-4% of the roughly 6,500 SFHs – sell in any year. That would be like commenting on the stock market when only 1 of the Dow Jones 30 stocks traded, or say 20 of the S&P 500.

It’s not quite as bad as that, of course, because, unlike companies, all houses are in the same industry – housing (duh) – and are suffering or enjoying the same economic conditions, well mostly. And very few houses have overseas subsidiaries.

The next table shows some of the fluctuations in the median price in the last few years:

Sources: MLS, Oliver Reports

Sales in Q1 are always a small proportion of the year’s total, which is why I did not write an article making a fuss about the “‘17% INCREASE IN PRICES!!!” Note also that the $582,500 for the half-year, while up 10% from 2013, is up just 6% from 2011.

One of the main reasons I am cautious about using quarterly numbers is the law of small numbers. Here’s an excellent example. At 9 a.m. on July 1, the median price of the 66 SFHs reported sold in MLS in the second quarter of 2014 was $585,000. By the end of the day, 3 late sales were reported, all at lower prices, so that the median price moved down to $568,000. One more very late sale took the median back up to $576,500.

That being said, there is no doubt that we are seeing prices increasing.

How about sales? The answer is pretty steady. It seems to me that most articles I read focus more on sales than prices, whereas most people I know are more interested in the price of one house – theirs – than the number of houses that have sold. But then most articles are written by people who make a living based on the number of houses bought and sold. Like me.

I did write an article last week Do mortgage rates and sales volume really drive home prices about the correlation – or lack of the same – between median prices and both sales and mortgage rates. Some surprising conclusions.

Source: MLS, Oliver Reports

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 our 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 FY2014 are based on actual sales in 2012. Thus the 2014 sales data, reported in this review, will be the basis for FY2016 assessments.

What this means is that in a period of falling prices the ASR is likely to be rising. The ASR is the AV divided by the SP: if the SP is falling (prices going down), the ASR will rise. And when prices are rising, when the SP is rising, the ASR will fall.

So what we, as homeowners, want is an ASR below 100% and falling. Let’s look at the ASR for Marblehead SFHs in recent quarters. I have also included the sales volumes in each price range.

As there is a lot of data in this table I will try to highlight the key points at the bottom of the table:

Source: MLS, Oliver Reports

Key points:
1.The total market ASR has fallen steadily from 101.5% in H1 2012 to 89.5% in H1 2014.
2. The ASR has fallen in all price brackets.
3. In H1 2012 sales in the $0-499k bracket were more than double those in the $500-749k range; in 2013 that ratio was down to 1.5; and in 2014 there were more sales from $500-749k than from $0-499k.
4. Sales in the $1,000-1,999k bracket have doubled since 2012.
5. I know the price increases look dramatic, but bear in mind that the 2011 figure was $550,000.

And finally, the current inventory by price:

Source: MLS, Oliver Reports

I think these tables and charts provide conclusive evidence that price are moving up, especially at lower levels.

Note: some of the data in this report was updated after the original publication.

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 [email protected].

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty

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