Boston Housing Crash Well Underway!

The numbers are starting to get ugly in Bubble Cities. Boston is leading the way but this is just the beginning. Watch California, Arizona, Florida,...etc all follow suit as housing price gains, experienced over the last few years, get wiped out. Reversion to the mean is the inescapable concept that house flippers chose to ignore, at their peril. The Shiller housing index suggests that we still have a long way to go before housing prices are reasonable from an inflation-adjusted historical context.

House prices plunge: All Hub gains since March ’04 vanish
By Jerry Kronenberg
Wednesday, November 29, 2006 - Updated: 04:19 AM EST

Boston house prices plunged last month at their fastest pace in more than 13 years, erasing all gains recorded since early 2004, new figures show.

Market tracker The Warren Group reported yesterday that median house-sale prices in Suffolk County, which mostly consists of Boston, fell to $325,950 - a stunning 13.31 percent decline from October 2005.

That drops prices back to May 2004 levels. It’s also the sharpest 12-month pullback since 1993.

“The October numbers continue a trend we’ve been seeing for some time now - a pronounced slowdown that’s affecting every facet of the housing market,” Warren Group CEO Tim Warren said.

Warren said Suffolk condos fared better, with median prices inching up 0.8 percent to $320,000 - the first gains since March.

Warren theorized condo values rose because some high-end developments came on the market in recent months, driving median prices higher.

Statewide, Warren reported median house prices fell at a 6.9 percent annual rate to hit $312,000. Median condo prices likewise declined 4.8 percent to $261,750.

Sales volume also dropped, with 14.9 percent fewer houses and 19.5 percent fewer condos changing hands. However, Warren said that’s better than the 20 percent-plus declines seen in July, August and September.

David Wluka, president of the Massachusetts Association of Realtors, said the smaller sales drop-offs show him that “the market correction may be about over.”

MAR, which tracks sales differently than Warren does, issued its own report yesterday showing median house prices fell just 2 percent statewide, while condo values declined 3.7 percent.

“We’re not at equilibrium, but we’re closer to it,” Wluka said.

But Wellesley College housing economist Karl Case is less optimistic. “All of the indicators - sales volume, prices, everything - are pointing downward,” he said.