Oceanfront: price reduction, open house and new 10ft window
11 Crown Way, Marblehead (click here for details) has an open House Sunday 12:00 – 2:00.
New price and spectacular new 10 ft window in butler’s pantry.
![IMG_1364[1]](https://oliverreportsma.com/wp-content/uploads/2013/07/IMG_13641-e1374335388312.jpg)
Are higher mortgage rates slowing the housing recovery?
July often sees a change in market tone. Those who have already sold their home know they need to find somewhere quickly, increasing their urgency. New buyers, however, are now quite likely to decide to wait until the Fall as the chances of being able to move in by Labor Day are diminishing. And sellers have to decide if they want to be on the market in the “dog days” of August, or wait until after Labor Day.
And then this year, of course, there has been the added factor of the jump in mortgage rates. To some extent it would appear that the Federal Reserve was surprised by the big jump in rates after what they thought was a simple statement of their intent to reduce their purchases of Treasuries and mortgage-backed securities as the economy improves. (more…)
Boston 77, Marblehead 1
I came across this very good, short video from Properties in the Hub (www.PropertiesintheHub.com) describing the Boston condo market this year: Boston Condo Sales
In the first half of 2013 there were 55 condo sales in Boston at $2 million and above. There were also 22 SFH sales at that level, making 77 total sales of SFHs and Condos $2 million and above in H1 2013.
In Marblehead, there was just 1 sale above $2 million during that time frame.
I have commented before about how puzzling it is to me that the higher end in Marblehead and indeed the North Shore generally has not seen the increased activity enjoyed elsewhere.
This video has encouraged me to look at what has been happening throughout Massachusetts in the higher end, with particular emphasis on the Counties surrounding Boston: Middlesex, Norfolk and Essex. I have detected a clear anomaly in the last year or so but want to go back and check the date before I publish the results. Stay tuned.
Marblehead Condo Mid-Year Review: Stabilizing
Just like the Single Family (SFH) market, the condo market in 2012 saw a swing to greater sales taking place at lower price levels. And just like the SFH market this caused the median price for the market overall to fall.
And just like the SFH market, the condo market in 2013 has moved on from the high level of sales at lower levels. The result has been that the median price in the first half (H1) of 2013 has recovered to 2010 levels and is very close to all-time highs. (more…)
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.
The housing market in 3 pictures
Here’s a simple view of the housing market over the last couple of years.
This is what has happened to sales (demand):
Source: NAR;Oliver Reports
While this is what has happened to inventory (supply):
Source: National Association of Realtors; Oliver Reports
And, following the laws of supply and demand, this is what has happened to prices:
Source: NAR; Oliver Reports
Pretty simple, really.
North Shore housing inventory by price : famine and feast
The current market repeats the situation seen all year: inventory (supply) remains tight at the lower end while there is plenty of supply at higher prices. Thus, in addition to the overall market numbers shown in my last post I am also showing the breakdown by price in the 17 North Shore cities and towns I follow.
As always, I can provide details of any individual city or town on request.
The tables below shows sales for the Last 12 Months (LTM), Pending Sales (Under Agreement and Contingent offers), and the number Available for sale.
First, Single Family Homes (SFHs):
Source: MLS, Oliver Reports
and Condos:
Source: MLS, Oliver Reports
North Shore housing inventory by town: still tight overall
It is generally accepted that a market is in equilibrium between buyers and sellers when there is 6 months’ supply, which means the number of houses for sale equals the number that has sold in a 6 month period.
At the beginning of July the inventory of Single Family Homes (SFHs) in the 17 North Shore cities and towns I follow represented just 4 months of supply, a figure that has crept up a little since the 3 months at the beginning of April. This is not surprising as spring and early summer sees the largest number of homes being listed for sale.
Within the overall figure of 4 months’ supply there is a wide variation, with under 3 months in Beverly, Georgetown, Peabody and Salem; and over 7 months in Boxford, Ipswich, Middleton and Nahant.
Remember that these numbers are for the total market, while we know that the supply situation is much tighter at the lower end than at the upper end where there is a glut of property for sale. In my next post I will show the breakdown by different price levels but here are the raw numbers
First, SFHs over the last 4 months:
Source: MLS, Oliver reports
Here are the detailed numbers for each town:
Source: MLS, Oliver Reports
And now for condos, first the totals:
Source: MLS, Oliver Reports
And now the detail:
Source: MLS, Oliver Reports
Are you planning to sell your home? Presentation is crucial.
With rising mortgage rates and a market that often slows down after July 4th, presentation of your home to the market is of crucial importance .
80% of buyers start their search online, so a strong online presence and marketing plan is critical.
Check out www.36CrestwoodRoad.com to see how I presented this house to the market. Note the interactive floor plans which allowed the buyer, who is from out of State, to say that she knew the house thoroughly before she visited. No surprises.
Additionally, my Facebook campaign produced 400 clicks on the listing in one weekend.
If you want to discuss the best way to present your home to the market, please contact me at [email protected] or 781.631.1223.
www.OliverReports.com for Marblehead and North Shore real estate news.
My 100th blog post
This morning I published my 100th post since starting Oliver Reports last November.
Prior to starting OR I wrote very lengthy and detailed semi-annual reviews for the Marblehead Reporter and I remember wondering if I would find enough topics to write about on a weekly basis.Well I guess I have answered that question!
My goal remains to publish timely, short articles (and links to relevant articles written by others) in order to help you, the consumer, be better informed. These articles also appear on Facebook, while on OliverReports.com I publish additional information.
If you enjoy my articles please tell your friends!
Is it time to consider an Adjustable Rate Mortgage?
I have a confession to make: I have never used a 30 year fixed rate mortgage in 20 years of owning homes in the US. And my jumbo mortgage, which is based on 1 year LIBOR, has just reset to 3% and would be at the same rate today as the 1 year LIBOR rate has not moved over the last month.
Adjustable Rate Mortgages (ARMs) got a bad reputation because of the shenanigans of unscrupulous lenders and brokers in the boom/bubble. And I strongly believe that these people – starting at the top – should be incarcerated and the key thrown away. On an, of course, completely unrelated topic read this article alleging that Bank of America encouraged their employees to lie to home owners.
Conventional ARMs, however, for those who understand them, are a perfectly feasible financing option. Bear in mind that the average time that a mortgage is held before the house is sold or the loan refinanced is believed to be about 7 years.
According to Freddie Mac’s weekly survey, the average rate, nationally, on a 30 year fixed rate mortgage this week was 4.46%, while that on a 5/1 ARM (meaning that the rate is fixed for 5 years and then resets each year thereafter) was 3.08%.
Now I want to make this simple, so use these numbers as a rough basis on which to work.
Over 5 years, paying 4.46% p.a. makes cumulative payments of 22.3%. At 3.08% the total is 15.4%. So there is a “saving” of 6.9%. Now ARMs adjust based on a certain index but generally cannot increase by more than 2% each year. Let’s assume that the rate goes up the maximum 2% in each of years 6 and 7. The chart below shows the cumulative interest paid:
Source: Freddie Mac; Oliver Reports
What this means is that even if the rate in years 6 and 7 increased by the maximum each year, interest paid over the average 7 year mortgage life would still be significantly less on an ARM than on a 30 year fixed,.
Again, this is very simplistic, not taking into account matters like principal reduction and tax deduction, but it’s the way I start my analysis. And it’s the reason I have never taken a 30 year fixed loan.
You are the only person who knows your life plan and risk tolerance, but an ARM may be an option you want to discuss with your financial advisor.
Putting the recent mortgage rate increase into perspective
One week the headlines are shouting that the recent recovery in home prices is creating the possibility of a new bubble; the next that the spike in mortgage rates is going to kill the recovery in prices and sales.
So perhaps a little perspective is called for.
If you first thought of buying a house when the 30 year rate was 3.5% and you find it is now 4.5% then that is a sharp jump. But many of us have owned houses for much longer. This chart, from Freddie Mac, confirms that mortgage rates are still at historically low levels. What you will note is that mortgage rates were much higher when home prices wee soaring. Mortgage rates are but one factor in the home buying decision.
Source: Freddie Mac; Oliver Reports
No Virginia, this it NOT a housing bubble
There is a saying in the stock market, wherein I spent some 35 years of my earlier life, that the market climbs a wall of worry, meaning that the market climbs even as many commentators express concern about various economic or political risks.
This week S&P published a report entitled: US Home Prices Suddenly Surge, But Talk Of A Bubble May Be Premature read report .
Wikipedia defines an economic bubble as: “trade in high volumes at prices that are considerably at variance with intrinsic values. It could also be described as a situation in which asset prices appear to be based on implausible or inconsistent views about the future.”
OK so before we get carried away here, let’s remind ourselves that nationally housing prices remain 28% below their peak (which WAS a bubble) and that affordability is close to all-time highs. As I have pointed out before, a market that goes down 40% and then “surges” 15% is still down 31%. Not exactly a bubble. (more…)
Mortgage rates to increase 1%
No, that’s not a forecast starting today, but a reminder of a forecast made by the Mortgage Bankers Association and published here in January. The key sentence read: “We expect that mortgage rates are likely to stay below 4 percent through the middle of 2013, and will increase gradually as the economy improves and finish around 4.4 percent in the fourth quarter of 2013.”
Well, rates did stay below 4% until June. And once rates have got back to that level, a forecast of 4.4% by year end doesn’t sound that scary, even if the speed with which we have got there is. Any angst felt at missing the bargain basement rates of the last year (and rates are back to where they were just over a year ago when they were considered amazingly cheap) is perhaps a reflection of our common desire to snare a bargain.
It is, however, worth remembering that during the boom years of 2005 and 2006 mortgage rates averaged 5.9% and 6.4% respectively.
The bottom line remains: if you want to buy a house and can afford to, do so.
$560,000 for 2 Boston parking spaces. Really? What would $560,000 buy in Marblehead?
Two parking spaces – not garages, just spaces – on Commonwealth Avenue in Boston sold this week for $560,000, which had me considering what one could buy for that money in Marblehead.
As it happens one house has just sold for exactly $560,000. Like the Boston sale this one had two parking spaces. Unlike the Boston sale this one also had a 2,600 sq.ft. 4 bedroom Single Family Home.
Hm.
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