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MA housing prices vs incomes, intermediate update
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PostPosted: Fri Sep 21, 2007 3:26 pm GMT    Post subject: MA housing prices vs incomes, intermediate update Reply with quote

Last October, Boston Bubble released an analysis of Massachusetts housing prices versus incomes for 1984 - 2005. The source data used to build that analysis has now been updated to cover 2006. An updated graph and analysis are forthcoming, time permitting, but there were a few surprises in the new data worth discussing beforehand.

The first source was The Massachusetts Association of Realtors' Statistical Review of Massachusetts Single-Family Housing Market (PDF), which contains a time series of the average, nominal sale price of single family homes and condominiums in Massachusetts. According to the updated data, the average, nominal price fell 15.56% from 2005 to 2006. What's more, the average price for 2005 was revised downward (probably due to the inclusion of additional sales), and the decline would have been 16.22% without that revision.

This is a dramatically larger decline that has been reported elsewhere. However, I suspect (but have not confirmed) that this is largely due to the fact that the number is a combination of single family home and condo sales and that the decline reflects a precipitous drop in the volume of single family homes sold, relative to condos. So the decline isn't necessarily earth shattering in and of itself, but it should have a big impact on the price versus income comparison for this data series.

However, the second source, The US Census Bureau's Table H-8. Median Household Income by State: 1984 to 2006, held an even bigger surprise. The median income in Massachusetts declined 1.23% from 2005 to 2006. That is a nominal decline too - the real decline would be even larger when adjusted for inflation. It should be noted that the nominal decline was within the standard error, and so the decline might be a statistical artifact, but incomes are still performing poorly even with this considered.

So while prices declined, improving the price to income ratio, incomes also declined, thereby worsening the ratio. Fortunately, the price declines were greater than the income declines, and so the ratio did improve overall.

I am exploring the use of the S&P/Case-Shiller Index so as to avoid the distortion introduced by declining single family home sales relative to condos. I will post an update of the original graph and possibly a graph based on the S&P/Case-Shiller Index once time permits.

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JohnQ
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PostPosted: Fri Sep 21, 2007 5:58 pm GMT    Post subject: Reply with quote

That's ok, about the decline in incomes and all. At least we know where everyones pay is going. Home purchases for homes that cost $1,000,000 or more are doing a nice, brisk business in Massachusetts. Must be, oh let me guess, that darn 5% of the population that controls 85% of the wealth. Those darn pranksters. Always playfully thumbing their noses at us. Boy, aren't they cute? And with quite the stranglehold on business and education opportunities. Jeez, if us morons weren't so enamoured with wealth and celebrity, we might actually take time to notice them violently raping us and shoving misery down everyones throat.

...where do I sign up for my pitchfork and torch?
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PostPosted: Fri Sep 21, 2007 6:25 pm GMT    Post subject: Reply with quote

JohnQ wrote:
Home purchases for homes that cost $1,000,000 or more are doing a nice, brisk business in Massachusetts.


I assume you're referring to this Globe article:

http://www.boston.com/realestate/news/articles/2007/09/20/amid_housing_slump_high_end_boom/

Looking at the number of sales above $1M may be entertaining (or "irritainment" for some), but it seems pretty useless to me. Inflation alone will make the number of homes in that segment "boom" over time, and it isn't very meaningful without additional context. The Globe should have adjusted for inflation, or compared the top quintiles from each year, or something along those lines. $1M is an arbitrary moving target given that the dollar loses value over time.

With that said, $1M is still a lot of money. I'm shocked that supposedly one third of the buyers paid cash.

Also from the article:
Quote:

Many of these buyers are executives in the state's still-strong economic sectors, particularly biotechnology, high-tech, and finance, where stock options awards and bonuses are common.

If this is accurate, I'd suggest possibly rethinking the pitchfork and torch since biotech and high-tech are generally meritocratic and innovations there do tend to benefit society as a whole.

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PostPosted: Fri Sep 21, 2007 6:52 pm GMT    Post subject: Reply with quote

I could become awfully rich selling pitchforks and torches to the masses. I just need to create a sexy ad campaign and then maybe they would understand about the distribution of wealth and who controls the people. I'll get Paris Hilton. Oh, it will be wonderful. Even the vast majority of ignorant people will eventually come to understand how truly bruised and hurt they are when they can't own a home, can't educate their children, can't stop that disease from spreading....

...oh, that's right, we blew passed those milestones years ago and I'm talking just the middle class.

I'm sure this is what France was like, let's say, around 1770.

...just before they started chopping off their formerly "beloved" leaders heads.

....mmm? maybe I should invest in guillotines and baskets.
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PostPosted: Fri Sep 21, 2007 7:13 pm GMT    Post subject: Reply with quote

admin wrote:
JohnQ wrote:
Home purchases for homes that cost $1,000,000 or more are doing a nice, brisk business in Massachusetts.


I assume you're referring to this Globe article:

http://www.boston.com/realestate/news/articles/2007/09/20/amid_housing_slump_high_end_boom/

Looking at the number of sales above $1M may be entertaining (or "irritainment" for some), but it seems pretty useless to me. Inflation alone will make the number of homes in that segment "boom" over time, and it isn't very meaningful without additional context. The Globe should have adjusted for inflation, or compared the top quintiles from each year, or something along those lines. $1M is an arbitrary moving target given that the dollar loses value over time.

With that said, $1M is still a lot of money. I'm shocked that supposedly one third of the buyers paid cash.

Also from the article:
Quote:

Many of these buyers are executives in the state's still-strong economic sectors, particularly biotechnology, high-tech, and finance, where stock options awards and bonuses are common.

If this is accurate, I'd suggest possibly rethinking the pitchfork and torch since biotech and high-tech are generally meritocratic and innovations there do tend to benefit society as a whole.

- admin


Uh, it says "executives," you know the people sitting at their fat desks while everyone else is working. Exactly my point.
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PostPosted: Fri Sep 21, 2007 7:18 pm GMT    Post subject: Reply with quote

I realize that you are at least partially joking, but do you really think that eliminating the rich will lead to the masses owning houses, educating their children, and having good health care?
Quote:

Uh, it says "executives," you know the people sitting at their fat desks while everyone else is working. Exactly my point.

That is not what "executive" meant at any of the high-tech companies I have worked at or any of the bio-tech startups that my friends work at. They tend to be extremely hard working.

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PostPosted: Fri Sep 21, 2007 7:32 pm GMT    Post subject: Reply with quote

I see the "perfect storm" effect generating some of this sentiment as sort of a water table quietly rising up or like the frog analogy where if you drop a frog in hot water; he'll jump out or if you put him in warm water and then bring it up slightly; he'll sit in it until he cooks.

The factors are: over spending of government (Iraq). Governments floating too many bonds to pay for ongoing expenses. Governments not keeping up with infrastructure fatigue. That bride collapse in Minnesota woke up a lot of States and it unveiled that many prior Administrations had swept up a lot under the rug and this maintenance and reconstruction is overdue.

I think the anger that some are getting is based on the misalignment of values and the short sited decisions that provide temporary relief but prolong and magnify the day of reckoning. Our society is resorting to some really polarizing means to reach goals like casinos. Despite the fact that some abhor the notion, others don't have the decency to not introduce something they know that many their neighbors detest. People don't care if something creates hostility, they just push forward and roll over people. Further, something like the casinos can hit people out of nowhere so it is kind of shocking to hear that your town might get hit with this overwhelming source of negative impact. You start with that lack of neighborly attitude and you back it up with incompetence or self-serving folks that cook data and the absurdity of weak arguments for the predators taking advantage of the weak i.e. casinos, Ameriquest, Ben LeGuerre and you do get strong opposition. If Deval Patrick listened more to people that actually loved this State than those that want to exploit this State, he'd be much better off. I guess the cherry on top is some of the wrapping paper that Administration uses like the "Patriot Act", "No Child Left Behind" etc. I guess we should have seen it coming when the "Education President" candidate came from a State with one of the worst public education systems in the Nation.

I'd not put a pitchfork in your hand, but rather bang away on those blogs and write letters to your representatives; hell get involved so this sort of thing doesn't continue. Despite the incompetence of our leaders, I wonder if other countries leaders are better at being stupid than even ours. I think if you flood as much as you can with positive and helpful information it's like helping to put out a fire.
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PostPosted: Sat Sep 22, 2007 2:51 pm GMT    Post subject: Reply with quote

The pitchforks and torches are coming, whether I say it or not. I give it 30 years before a real genuine upheaval arrives. I have never seen this country so angry.

Yeah, it doesn't look like the 60's, but then again the 60's didn't have the internet. There you will find some of the ugliest anger that is being generated, which in total makes the campus protests of the 60's tame. Just cuz we don't see the protests, doesn't mean there isn't a concerted effort taking place that is aligning factions for the big push. They just don't comprehend their own power yet.

It's the whole "rich getting richer," "golden parachute," "unaffordable education (the real crime)", etc.

...and I submit that at this rate, things are going to get so bad that the lazy and ignorant will literally have to take back the power en masse just to have an existence better than a third world country.

...tell me where I'm wrong.
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PostPosted: Sat Sep 22, 2007 3:00 pm GMT    Post subject: Reply with quote

Oh, by the way, I like what you guys do at this site and didn't want to steer away from the topic of the housing crash.

It's just that I literally read one article about how wages were going down and 2 min. later I was reading about how the purchasing of $1,000,000+ homes in Massachusetts was going up.

Not hard to make the connection.
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PostPosted: Sat Sep 22, 2007 3:46 pm GMT    Post subject: Reply with quote

JohnQ wrote:

...tell me where I'm wrong.


I'm not going to speculate on how accurate you may be about an upheaval, but I don't think that "the rich" are the problem. It is not as if you are talking about a practically limited physical resource - the rich are not hording housing, education, or health care. The fact that the masses have a hard time affording these doesn't have much to do with the rich having most of the money. If you were to overthrow the rich and take what they have, it would not bring you education or health care, in fact it would probably make you even worse off in those respects since you would have torched a lot of professors, doctors, and bio-tech innovators.

Also, while those who may be the source of the problems are generally rich, that doesn't mean that those who are rich are all a source of the problems. I think you should be more specific in who are you targetting since a blanket campaign against the rich would unfairly impact a lot of people who have made their wealth in a way that has had a net positive impact on society (e.g., the founders of Google). Don't throw the baby out with the bathwater.

For instance, and to steer this back toward housing, the price of the bulk of housing in the Boston suburbs doesn't have much to do with what the rich are paying for the top X% of the houses. There are plenty of people and organizations who bear some degree of blame for the high price of housing in general. I think the government bears a large portion of the blame because of all the incentives they provide to steer people toward homeownership - those all just filter into higher prices. I also think that the masses bear some blame for getting caught up in some irrational exuberance over the last several years and buying what they could not afford. The CDO packagers on Wall Street also bear some blame for lending way too freely without regard to risk. And yes, many of those Wall Street people are "rich" (or were) but most of the rich are not those Wall Street people.

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PostPosted: Sat Sep 22, 2007 7:55 pm GMT    Post subject: Reply with quote

Quote:
There you will find some of the ugliest anger that is being generated, which in total makes the campus protests of the 60's tame.

...and I submit that at this rate, things are going to get so bad that the lazy and ignorant will literally have to take back the power en masse just to have an existence better than a third world country.


I like the sentiment of the your idea, however, I disagree. Many of those blogs are paper tigers. What you don't realize is that as soon as the irate bloggers go out on the street, they're dog tagged (given criminal records) and will find themselves unmarketable so in essence, all the web's done is given them a 'Fight Club' to hang out in where they can talk trash and then go back to their 7x24 sports and sci-fi channels; heck, even trailer homes have those. The concept of the Stone's "Street Fighting Man" went out a long time ago for America. What'll happen is that those with resources will bi-locate to the Caribbean, Canada, Oz, etc, and keep a foothold in the States (BTW, this number is less than a million) and the others will accept a much reduced standard of living and be living in a place which'll be a lot like Brazil during the early 80s with stagflation and corruption.

Realize, the US gave up on science and engineering during the 90s with the closure of facilities like the supercollider, which hired 1000s of physicists, and the reduction of funds to the Natl Labs. Instead, the private and public sectors assumed that asset bubbles in telcom and IT projects was the best way to use the nation's top tech graduates during the 90s and that, in itself, was a fatal flaw since programming/code maintenance is a trade school type of education than that of the classical sciences (physics, chemistry, mechanical engineering, etc). What's happened is that the science lead with we had, starting from Tesla/Edison up through the late 80s, was completely lost during our two assets bubbles of the past eighteen or so years. Today, the best and brightest science grads opt for Wall Street (quant/risk analysis), patent law, or being a doctor. Very few want to do research and develop something out of nothing. These megatrends aren't changing anytime soon.
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PostPosted: Sat Sep 22, 2007 9:08 pm GMT    Post subject: Reply with quote

It's not about numbers crunching. It's about people. You know, Mom, Dad, Uncle Ernie.

You can "do the math," or you can look into their eyes. It isn't what's right. We all know that it's survival of the fittest. That is, until the masses string you up with piano wire. That usually comes when so many people who have so little to retire on, to educate themselves, etc. watch the few of privelege strut around like peacocks just because they were born into a certain family.

They're getting screwed, and they're starting to notice. Like I said, there isn't an organized movement yet, but they are close to joining the ends.

And, by the way, who are you guys to be so arrogant to just shrug it off? Lot's of angry, bitter folk out there.

Just take a look.
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PostPosted: Sat Sep 22, 2007 9:13 pm GMT    Post subject: Reply with quote

Anonymous wrote:
Quote:
There you will find some of the ugliest anger that is being generated, which in total makes the campus protests of the 60's tame.

...and I submit that at this rate, things are going to get so bad that the lazy and ignorant will literally have to take back the power en masse just to have an existence better than a third world country.


I like the sentiment of the your idea, however, I disagree. Many of those blogs are paper tigers. What you don't realize is that as soon as the irate bloggers go out on the street, they're dog tagged (given criminal records) and will find themselves unmarketable so in essence, all the web's done is given them a 'Fight Club' to hang out in where they can talk trash and then go back to their 7x24 sports and sci-fi channels; heck, even trailer homes have those. The concept of the Stone's "Street Fighting Man" went out a long time ago for America. What'll happen is that those with resources will bi-locate to the Caribbean, Canada, Oz, etc, and keep a foothold in the States (BTW, this number is less than a million) and the others will accept a much reduced standard of living and be living in a place which'll be a lot like Brazil during the early 80s with stagflation and corruption.

Realize, the US gave up on science and engineering during the 90s with the closure of facilities like the supercollider, which hired 1000s of physicists, and the reduction of funds to the Natl Labs. Instead, the private and public sectors assumed that asset bubbles in telcom and IT projects was the best way to use the nation's top tech graduates during the 90s and that, in itself, was a fatal flaw since programming/code maintenance is a trade school type of education than that of the classical sciences (physics, chemistry, mechanical engineering, etc). What's happened is that the science lead with we had, starting from Tesla/Edison up through the late 80s, was completely lost during our two assets bubbles of the past eighteen or so years. Today, the best and brightest science grads opt for Wall Street (quant/risk analysis), patent law, or being a doctor. Very few want to do research and develop something out of nothing. These megatrends aren't changing anytime soon.


Oh, I forgot to mention, I'm primarily talking about the huge middle class, not criminals or whatever point you were trying to make. We are in the early part of the ballgame. A ballgame that the middle class has never been in.

...this time they get trounced in a blow-out.
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PostPosted: Sat Sep 22, 2007 9:52 pm GMT    Post subject: Reply with quote

JohnQ wrote:

And, by the way, who are you guys to be so arrogant to just shrug it off? Lot's of angry, bitter folk out there.


Sorry if you took it as arrogance, I just don't agree with some of your assumptions. Namely, I think that 1) many rich have worked for what they have and deserve their wealth and 2) hurting them indiscriminately will not help the masses and will in fact have the opposite effect. I think your anger would be better directed at the root causes of the problems you identified (e.g., the government, irrational exuberance, CDO agencies, etc.).

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PostPosted: Sat Sep 22, 2007 11:20 pm GMT    Post subject: Reply with quote

I think the good guys will win.

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2007/08/16/my_father_and_the_loan_sharks/?page=full

Take a look at this ex CEO exposing some dirty family history so he can help others understand the potential negative impacts of gambling. Here's a rich guy that actually cares and put himself out there. It is the responsibility of joe six-packs to empower quality leaders like this. I hope that the frustration many you see feeling is just the temporary feeling before they plan and take constructive positive action.
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