Income by Percentile in Massachusetts

by Michelle J. Lane, Realtor

For those of you who received my recent newsletter you know that the real estate market in showing signs of slowing growth.  There are serveral reasons for this.  I mentioned that a major reason is simply that buyers have hit the wall on how much house they can afford.   This post provides some background on what that means.   

Looking at the country as a whole, the income required to be a top earner is as follows.  

  • $480,930 – to be considered in the top 1% 
  • $214,462 – to be considered in the top 5%
  • $138,031 – to be considered in the top 10% 
  • $122,744 – to be considered upper class (earning twice the median of $61,372)

Contrast that with what it takes to be in those same percentiles in Massachusetts:

  • $582,774 – to be considered in the top 1% 
  • $260,286 – to be considered in the top 5%
  • $192,612 – to be considered in the top 10% 
  • $164,760 – to be considered upper class (earning twice the median)

The good news is that more people in the Boston metro area earn an income in the Upper Class bracket than in the rest of the country.

The bad news is that the median price of a single-family house in the Boston area is $615,000 vs $200,000 in the US as a whole.   Other surrounds towns median prices are as follows:

  • Brookline – $1,760,000
  • Newton – $1,202,500
  • Wellesley – $1,433,250
  • Milton – $688,000
  • Cambridge – $1,442,500
  • Somerville – $752,500
  • Medford – $611,000

If you want the numbers for your town, just ask and I will look that up for you.

SO, the median home price in the US is 3.26 times the median income of $61,372. The median home price in Massachusetts is 7.45 times the median salary of $82,380.  

In Newton, where I live, the median income is $147,854. The median home price is $1,202,500.  That is a ratio of home prices that are 8.13 times the median income. This is untenable. Granted, the Boston area has more high income earners than other parts of the state and certainly, other parts of the country.  See the chart below.  But there are only so many high earners to buy in the area and those earners want the best houses – those that are new or in like-new condition and in desirable locations.  That leaves sellers who do not have new or near-perfect homes with a smaller pool of buyers which is why we are seeing a softening of the market on the lower end.  Higher interest rates are bound to compound the problem.

The good news is two-fold 

  1. every house can sell.  It just has to be priced right for the amount of money and effort you are willing to invest to prepare it for the market.
  2. because of low inventory, the market is not going to slump. It appears, for now, simply that price growth is slowing.

 

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904

 

 

Remember When I Said You Would Know the Market Had Hit Bottom When You Could See it in the Rear View Mirror?

If you want to know when the market will hit bottom, look in the rear view mirror. According to all ways of measuring it, the downward slide of home prices in the Greater Boston area is over.  Most likely due to the lack of inventory – see my previous blog entry.

From the Boston Globe:

The Massachusetts housing market showed further signs of improvement last month with robust sales and rising prices, data released Tuesday show.

Sales of single-family homes increased by 10 percent in January, reaching the highest level for that month since 2007, according to the Warren Group, a Boston company that tracks local real estate.

The median price rose to $277,750 in January, which was 6.8 percent higher than during the same period in 2012. It was the fourth consecutive month of price increases, the Warren Group said.

“We ended 2012 on a pretty positive note, and this is carrying into January,’’ said Timothy M. Warren Jr., the firm’s chief executive. “There are positive signs that 2013 will be a second year of recovery.”

Condominium sales also rose in January, by 10.9 percent compared with the same month a year earlier, according to the Warren Group. But the median price for condos slipped to $240,000, a 1.8 percent drop compared with prices at the same time last year.

The monthly housing data for Massachusetts came on a day when other real estate news showed that 2012 marked the official recovery of the state and US housing markets.

The S&P/Case-Shiller Home Price Indices, which measure repeat home sales in 20 US cities and are widely considered some of the best markers for housing values, reported Tuesday that in the Boston area, home values increased 3.6 percent in December, compared with December, 2011.

From the Economist’s Outlook – Demand  continued to expand faster than  supply. The Buyer Traffic Index rose to 56  from 36 in the same period last year, while the  Seller Traffic Index barely moved, ending at 38 from 37 last year.  REALTORS® reported numerous cases of multi-bidding  resulting in “properties selling above the list/asking price”  or “distressed sales selling close to market price.”  

From Inman News

Existing-home sales, prices and inventory saw dramatic changes in 2012 reminiscent of the housing boom, statistics released today by the National Association of Realtors show.

At 4.65 million units, 2012 existing-home sales were up 9.2 percent from 2011, according to NAR’s preliminary totals for the year. That would be the highest volume since 2007, when 5.03 million were sold.

Bolstered by low inventories, the national median existing-home price was up 11.5 percent from a year ago in December, to $180,800. December saw the 10th consecutive month of year-over-year price gains, a trend not seen since May 2006.

For 2012 as a whole, the national median existing-home price was up 6.3 percent, to $176,600, the largest annual price gain since prices surged by 12.4 percent in 2005.

At 1.82 million units at the end of December, existing-home inventory now represents a 4.4-month supply, the lowest level since May 2005, near the peak of the housing boom.

“Likely job creation and household formation will likely fuel (market) growth,” said NAR Chief Economist Lawrence Yun in a statement. “Both sales and prices will again be higher in 2013.”

Find Homes for Sale in the Greater Boston Area

Michelle J. Lane, Realtor 

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Case-Shiller Home Price Index for Boston

I am publishing this for those of you who wonder when the height of the market in the Boston area was and where home prices are in relation to the height.  The height was in 2005.  The bottom was in April of 2009.  We’ve been bouncing along that bottom since then, hitting it again in Dec 2011/Jan 2012.  But, as you can see, home prices are starting to do a steady creep upward.

I believe this is in large part due to the fact that there is very little inventory on the market in the past 6 months.  This time last year, there were roughly 26,000 single-family houses on the market.  Today there are about 21,000, roughly a 20% drop.  Low inventory is bound to push prices up. 

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