General Index 

In this post, we're going to continue our series on heating to review Forced Hot Air Heat.

In Massachusetts, Forced Hot Air systems have become the preferred choice of most builders and buyers. As we noted in the last post, this is primarily due to it's compatibility with A/C, as we'll discuss below. This is part of a series where we look at heating systems, including distribution systems (hot water, hot air, and electric) as well as the heating units themselves (burners and furnaces).

How does Forced Hot Air Work?

Forced Hot Air is produced when the heating element heats air. Now, there's two ways that a system can do this, one is "direct" where it heats the air directly, and one is "indirect" where it heats something else (like water,) and then air from the home is circulated around the hot element, heating it up. Either way, air from the home is circulated through duct work - house air comes from "return" ducts, is heated and then is pushed out to the various rooms. This process continues until the thermostat tells the burner that the room is at the correct temperature.

Advantages/Disadvantages of Forced Hot Water Systems

The main advantage is that it is very simple to add Air Conditioning to a home with forced air ducts. The heating and cooling systems can use the same transport system, which is very convenient.

Most of the disadvantages have solutions, but it's worth noting which might be missing in your setup.  The primary complaint, especially with directly heated air systems, is that the air in the winter rapidly dries up, lowering the humidity uncomfortably in the winter. This is most commonly solved by adding a humidifier to the duct work, which simply adds water to the air if it gets too dry. Indirect heat system for air are supposed to avoid this issue entirely, which is why they avoid heating the air in the first place. Forced Air Systems do create moving air, and sometimes the vents are place in such a way where that air is uncomfortable, or there is noise. Forced Air systems do have air filters that require annual maintenance, but they help pull pollen and allergens out of the air, so that's both a plus (cleaner air) and a minus (buying and replacing filters). Also, forced air is more difficult to "control" in terms of hot and cold spots, but generally the difference is a mild annoyance in the areas where it is a problem. Other disadvantages include that you will likely be looking at "tank based" hot water systems, commonly electric, but sometimes gas, and the tanks don't provide "endless" hot water, but usually enough in most cases when sized correctly for the house/family. Obviously, not all families use the same amount of hot water, so some families may need larger tanks.

If A home has forced Hot Air does it use Gas? Probably, but it's not a given. Forced hot Air systems can use Oil burners/boilers as well. The delivery system, the duct work, is really separate from the heating elements in the system.

Should I Pay More or Less for a Home with Forced Hot Air? Generally, buyers pay about the same for Forced Hot Water and Forced Hot Air when they purchase homes. The market generally discounts homes that have electric heat, which is seen as less desirable.

Do Good Things Today!

Matt Heisler

In this post, we're going to talk about Forced Hot Water Heat.

In Massachusetts, Forced Hot Water systems are still the dominant system that we see in homes today. Although most builders (finally) have cut over to forced hot air, decades of building with forced hot water means there's still lots around. This is part of a series where we look at heating systems, including distribution systems (hot water, hot air, and electric) as well as the heating units themselves (burners and furnaces).

How does Forced Hot Water Baseboard Work?

Part of the popularity of Forced Hot Water is because it is very simple conceptually, and virtually maintenance free. Water is heated and circulated through copper pipes, which are surrounded by aluminum baffles. Copper and aluminum are both excellent conductors (as we all remember from high school chemistry, right?), and so the heat in the water is rapidly transferred to the aluminum baffles.

The aluminum "fins" are packed tightly together, to leave a small air gap of about 1/8 of an inch, and that air gap is quickly heated when the aluminum heats up. The air rises out of the air gap between the fins, cool air rushes to replace it, and the convection that is started results in a warmer room. Although there is some noise when the copper and aluminum expand, (resulting in quiet pings), the water circulating through the pipes is virtually noiseless.

Advantages/Disadvantages of Forced Hot Water Systems

There are several. They are very low maintenance, often requiring nothing for years at a time. They are quiet, as noted above, and they do not "dry out" a home in winter. Since the air isn't heated directly by the burner, the moisture levels in the home remain constant. Forced air systems are also very good at distributing heat consistently without cold or hot spots in houses, which helped make them popular. Forced Hot Water systems are also very compatible with on-demand hot water systems, which tend to supply more hot water than tank based systems. Most forced hot water systems have on-demand tank and/or tankless hot water as part of their setup.

The Disadvantages are that it's not compatible with A/C. Air-conditioning requires duct work, and most homes with forced hot water were not built with duct work, and they need to be retrofitted for the ducts. This is the primary reason that builders have begun to favor forced air systems in newer homes.

If A home has forced hot water does it use oil? Probably, but it's not a given. Forced hot water systems can use gas burners/boilers as well. The delivery system, forced hot water, is really separate from the heating system.  

Do Good Things Today! Matt Heisler

OK! A new year is always a good time to take a snapshot of where the market is. There's a lot of complicating factors in January. There's less inventory, and many of the homes still on this time year have bad stats, but still, it's where we start.

In Brief, this report shows where the most demand vs. supply is. It is not my personal ranking of where you should live, but it should give you insight in to how hard it might be to find a house in your favorite community. In the towns at the top, homes are selling faster, often outpacing inventory, and buyers are finding themselves in competitive situations more often. At the bottom, sellers are struggling to find buyers, and towns often have very high market times. For More information on Hot Seller Index Town Methodology, check here:

Here are some things that stood out to me.

• Framingham reaches a new high with the #2 ranking.  Framingham has only been as low as 6, I think, but it's not showing any signs of cooling off.  I'm sure a lot of that is driven by the good prices in Framingham, but the recent increase in residential taxes may cool off some buyers.
• Westborough from this time last year has climbed all the way from #17 to #3 since January of last year.  Much of that is simply the total lack of anyone selling in Westborough, but some, I'm sure, is the competitive Hopkinton Market.
• Speaking of which, Hopkinton has bounced back into the top four after dropping briefly to six, which was it's lowest ranking so far.  
• The Sudbury ranking is a little misleading.  If you are looking under 650K, Sudbury is consistently a top 10 market.  But there are so many properties over 800K in Sudbury - that aren't selling very fast - that the overall town statistics have done poorly in all my rankings.
• Marlborough and Hudson have remained in the top half in all the rankings so far.  Buyers are outnumbering sellers in these markets consistently, but not so much that it's a sellers market.
• Lastly, from April of last year, the average score on the Hot Seller Index (unweighted) was 73.6, after a tough winter, transactions were quite slow, and April probably represented the low of the year. A number in the 70's is a softer, but still neutral market.  We start of this year at 81.9, up 8 points on the   HSI, which is a big jump, and represents a number that is still neutral, but far less soft.
• Medfield has returned to earth, after breaking the top 5 in October.  Sudbury and Medfield are the most "expensive" markets in my index, and neither, on the whole, has done much then float around the middle.  This is clearly reflective of the more difficult economic times, and peoples reluctance to commit big sums of money to housing.

Do Good Things Today!

Matt Heisler

Worcester Housing Market Statistics Overview

For as long as I've been tracking Worcester, there's been a huge overhang of inventory. So, this is a special day. For the first time the Sold numbers are ahead of the actives. Now, this is a seasonal low point for actives, but still, the numbers paint a remarkable picture of a healing real estate market in Worcester. A Hot Selling Index score of 77 is hardly red hot, but it indicates that a market where sellers are gaining a little more leverage is starting to take shape. In most markets, it would indicate a NEUTRAL market. Buyers: There's still good deals in Worcester, but it won't be as easy today as it was two months ago (or four months ago), but there are values to be had. As always, be aware that Worcester is actually a collection of a dozen or so "sub-markets", and if you'd like information on the part of town that you're looking in, just let me know, we'll narrow it down a bit. Sellers! Thinking about selling? This is the best real estate market in Worcester in five years. Why not see if you can move?

In the not so good news category, the bank affected housing stock is up in both categories, foreclosures and short-sales. They are up just slightly, but now total over 150 houses, or 30% of the market. That's a ton of houses that are going to hang around and put pressure on prices, so the real test will be to see if that starts clearing up. If it does, Worcester will be in-line for price appreciation. 2012 should be very interesting!!

Worcester Housing Market Statistics - Raw MLS Data

• There are 487 homes (vs. 636 in the last Worcester Home Sales Report) listed as For Sale.
• There have been 529 houses sold (vs. 531) in the last 6 months, and 289 homes sold in the last 3 months.
• There was an Average Market Time of 148 days for just SOLD homes.
• There is an Average Market Time of 185 days (vs. 160) of the homes For Sale.
• The Dollars paid per Square Foot in Worcester is $112
• There was an Average Sold Price of $164,238 for sold homes.
• Worcester has 46 properties (vs. 39) advertised as lender owned (typically foreclosure) .
• Worcester has 107 properties (vs. 99) advertised as short sales required by lender .
• Worcester “Hot Seller Index”: 77 Last Report: 74

*All statistics are for Single Family Houses and based on data in MLS.

Read my Explanation for Massachusetts Home Data Reports.

Our Most Accessed Posts

• How do I get the seller to pay my closing costs, and is it free money?
• What do I need to know about Radon as a Home Buyer?
• Will Solar Panels add Value to my Home and build Equity?
• Is it a bad idea to buy a house near power lines? Is it safe to buy a house near high tension powerlines?
• How do I buy a home if it has a failed septic?
• Investors can make money on foreclosures - can you?
• What should I do if I have high levels of Arsenic in my Private Well?

About Matt Heisler

Matt Heisler is a real-estate professional and owner of this website. He has been selling homes in MA for buyers and sellers for over 20 years. He is an expert in foreclosure purchases, short-sale purchases, short-sale sales, buy and hold investing, fix and flip investing, and of course traditional residential home sales. He is happy to take questions as they pertain to real estate on Title V, Radon, Termites, Sump Pumps, Roofs, Foundations, Wells, Septic Systems, Cash-Flow, Staging, and a host of other housing issues. As a Vanderbilt University alumnus, he is proud to serve his local community.

Do Good Things Today! Matt Heisler

*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.

Westborough Housing Market Statistics Overview

Well, this is a ugly buyer report for homes in Westborough. 54 Homes for sale in a town of this size is really small, and I know that a lot of homes were de-listed for the holidays, but still, there's not much to buy. Looking at the market time of the For Sale Homes, and we see that the homes that are on the market have already been on the market for 9 months or more - so they probably aren't the best houses left. Hopefully we'll see a big rebound in inventory this year, otherwise the steep drop in transactions that Westborough saw in the last three months (35, which is just terrible) will persist.

Some good news is that the lender impacted homes are way down. Just five short-sales and only one foreclosure in town, so what is on the market is ready to be sold. With so little inventory, buyers will be chasing inventory, be sure of it, so if you see a winner, don't wait for others to find it.

Westborough Housing Market Statistics - Raw MLS Data

• There are 54 homes (Vs. 90 in the last Westborough Home Sales Report) listed as For Sale.
• There have been 88 houses sold (vs. 105) in the last 6 months, and 35 homes sold (vs 63) in the last 3 months.
• There was an Average Market Time of 91 days for just  SOLD homes.
• There is an Average Market Time of 231 days of the homes For Sale.
• The Dollars paid per Square Foot in Westborough is $185
• There was an Average Sold Price of $443,949 for sold homes.
• Westborough has 1 properties (vs. 2) advertised as lender owned (typically foreclosure) .
• Westborough has 5 properties (vs. 9) advertised as short sales required by lender .
• Westborough “Hot Seller Index”: 95 Last Report: 91

*All statistics are for Single Family Houses and based on data in MLS.

Read my Explanation for Massachusetts Home Data Reports.

Our Most Accessed Posts

• How do I get the seller to pay my closing costs, and is it free money?
• What do I need to know about Radon as a Home Buyer?
• Will Solar Panels add Value to my Home and build Equity?
• Is it a bad idea to buy a house near power lines? Is it safe to buy a house near high tension powerlines?
• How do I buy a home if it has a failed septic?
• Investors can make money on foreclosures - can you?
• What should I do if I have high levels of Arsenic in my Private Well?

About Matt Heisler

Matt Heisler is a real-estate professional and owner of this website. He has been selling homes in MA for buyers and sellers for over 20 years. He is an expert in foreclosure purchases, short-sale purchases, short-sale sales, buy and hold investing, fix and flip investing, and of course traditional residential home sales. He is happy to take questions as they pertain to real estate on Title V, Radon, Termites, Sump Pumps, Roofs, Foundations, Wells, Septic Systems, Cash-Flow, Staging, and a host of other housing issues. As a Vanderbilt University alumnus, he is proud to serve his local community.

Do Good Things Today! Matt Heisler

*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.

In the course of doing my Real Estate Activities, I spend a lot of time at town halls all across Metrowest. Today I was in Framingham doing research, and I was surprised to see that the Assessors office was so full of people that there was a line out the door. (It's not a big office, but still, this was a surprise.) Even more shocking, everyone (except me, of course) was there for the same reason. Their tax bill. Taxes AND assessments went up in Framingham, resulting in much higher tax bills for many residents. The mood in the office was pretty tense, people were pretty upset.

What happened to the Tax Rate in Framingham?

Well, there's an overview of what happened at the selectman meeting, but it's not very clear, so I'll try to make it a little simpler.

Towns have a budget that they have to pay for. For most towns and cities in MA, the taxes on property are essentially the only way that towns raise the money for their budgets. What people forget, of course, is that there are TWO classes (and sometimes more) of real estate that get taxed. Residential and Commercial. Residential is the easiest to understand, and generally the largest - it's the houses that we all live in. Commercial, of course, includes office buildings, restaurants, factories, apartment buildings and the like. Many times, the two markets move in tandem, but sometimes they do not.

They did not in Framingham, with serious consequences for residents.

The town assessor reported that in 2010, home values on average were up 4.75% in Framingham. That's not a misprint people, and if you were reading this blog in 2011, you would see the market was EVEN more tight in Framingham than last year, and I'll bet prices were up again (probably not as much, but up). The problem is that in 2010, commercial values were still falling. That means the taxes that Framingham can collect on those buildings went down, and as such they need to get more money from - you guessed it - the residential folks. It's double painful in Framingham because they have a "dual-tax" rate, where commercial buildings are taxed at roughly twice the same rate as residences, but that makes it twice as painful when those values are falling. So the tax rate on Residents when up 1.75%, but assessments went up too, so those factors are multiplied together and that means tax bills are up 3-11% or more for most residents.

Still confused? Here's how the math works. The town of Framingham needs to collect $100 in 2011. The collect $50 from Residents and $50 from Commercial Property owners. What happened this year, is residence values went up, and commercial values went down. That shifts the tax burden to residences, unavoidably, so in this example residences now need to come up $52 for 2012 and Commercial Property will only be responsible for $48. Total bummer, I know, but Framingham is certainly not alone. Any town with significant commercial property is likely facing a similar problem.

Taxes Too High? File an Abatement

Many residents have already, but if you believe your property is not being valued correctly, you can file for an abatement. The forms you need are here:, but be warned, you MUST file your abatement by February 1st, or the town can dismiss it. (An abatement is a legal process, if you have questions, you should ask an attorney, and not rely on this posting). Filing an abatement does not guarantee your taxes will be lowered, so you should do research first to find out if you are a good candidate for an assessment adjustment. Good Luck-

Do Good Things Today!

Matt Heisler

Boylston Housing Market Statistics Overview

Well, this is interesting. Boylston looked soft in the fall, but the buyers clearly figured out that prices were attractive, as they had a monster close to last year. 20 Sales in the final three months is 80% of the total in the last six months, and you can see the large jump in the HSI from a weak 69 to 86.

Not much inventory left, so I'd expect things to slow down a bit. But there's clearly buyers who have found value in Boylston lately.

With such a small town, hard to read into the bank impacted inventory, but it's up. Short-sales and foreclosures are both up, admittedly, from basically zero, but 4 properties out of 21 is a lot, percentage wise. Should be good news for sellers who do not have to get a lender to sign off.

Boylston Housing Market Statistics - Raw MLS Data

• There are 21 homes listed as For Sale (vs. 31 in the last Boylston Home Sales Activity Report).
• There have been 25 houses sold (vs. 19) in the last 6 months, and 20 homes sold (vs. 12) in the last 3 months.
• There was an Average Market Time of 190 days for just SOLD homes.
• There is an Average Market Time of 209 days of the homes For Sale.
• The Dollars paid per Square Foot in Boylston is $138
• There was an Average Sold Price of $368,867 for sold homes.
• Boylston has 1 properties (vs. 0) advertised as lender owned (typically foreclosure) .
• Boylston has 3 properties (vs. 2) advertised as short sales required by lender .
• Boylston “Hot Seller Index”: 86 Last Report: 69

*All statistics are for Single Family Houses and based on data in MLS.

Our Most Accessed Posts

• How do I get the seller to pay my closing costs, and is it free money?
• What do I need to know about Radon as a Home Buyer?
• Will Solar Panels add Value to my Home and build Equity?
• Is it a bad idea to buy a house near power lines? Is it safe to buy a house near high tension powerlines?
• How do I buy a home if it has a failed septic?
• Investors can make money on foreclosures - can you?
• What should I do if I have high levels of Arsenic in my Private Well?

About Matt Heisler

Matt Heisler is a real-estate professional and owner of this website. He has been selling homes in MA for buyers and sellers for over 20 years. He is an expert in foreclosure purchases, short-sale purchases, short-sale sales, buy and hold investing, fix and flip investing, and of course traditional residential home sales. He is happy to take questions as they pertain to real estate on Title V, Radon, Termites, Sump Pumps, Roofs, Foundations, Wells, Septic Systems, Cash-Flow, Staging, and a host of other housing issues. As a Vanderbilt University alumnus, he is proud to serve his local community.

Do Good Things Today! Matt Heisler

*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.

Upton Housing Market Statistics Overview

Upton is a small town, so we don't want to read too much into this data set, but it certainly has an auspicious look to it. The fall was terrible, with sales dropping off from a wonderful clip. Maybe, it has to do with the easy fruit being picked from the tree, but we won't know until we get some fresh listings in 2012.  Looks like a neutral market, buyers and sellers both need do do some work to find a match in Upton.

No real change in the "shadow" inventory. I've been tracking bank impacted inventory across all Metrowest, and really haven't seen any real increase in foreclosures or short-sales. It's still too much of the markets, but it's hardly a drag on them at this point.

Upton Housing Market Statistics - Raw MLS Data

• There are 31 homes (vs. 46 in the last Upton Home Sales Report) listed as For Sale.
• There have been 41 houses sold (vs. 47) in the last 6 months, and 16 homes sold (vs. 32) in the last 3 months.
• There was an Average Market Time of 134 days for just  SOLD homes.
• There is an Average Market Time of 155 days of the homes For Sale.
• The Dollars paid per Square Foot in Upton is $155
• There was an Average Sold Price of $362,362 for sold homes.
• Upton has 1 properties (vs. 2) advertised as lender owned (typically foreclosure) .
• Upton has 2 properties (vs. 1) advertised as short sales required by lender .
• Upton “Hot Seller Index”: 80 Last Report: 83

*All statistics are for Single Family Houses and based on data in MLS.

Read my Explanation for Massachusetts Home Data Reports.

Our Most Accessed Posts

• How do I get the seller to pay my closing costs, and is it free money?
• What do I need to know about Radon as a Home Buyer?
• Will Solar Panels add Value to my Home and build Equity?
• Is it a bad idea to buy a house near power lines? Is it safe to buy a house near high tension powerlines?
• How do I buy a home if it has a failed septic?
• Investors can make money on foreclosures - can you?
• What should I do if I have high levels of Arsenic in my Private Well?

About Matt Heisler

Matt Heisler is a real-estate professional and owner of this website. He has been selling homes in MA for buyers and sellers for over 20 years. He is an expert in foreclosure purchases, short-sale purchases, short-sale sales, buy and hold investing, fix and flip investing, and of course traditional residential home sales. He is happy to take questions as they pertain to real estate on Title V, Radon, Termites, Sump Pumps, Roofs, Foundations, Wells, Septic Systems, Cash-Flow, Staging, and a host of other housing issues. As a Vanderbilt University alumnus, he is proud to serve his local community.

Do Good Things Today! Matt Heisler

*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.

Each Year, I try to do a Prediction for my regular readers. Last years predictions got viewed 117 times, not to bad for a random post.

A Note about all Predictions

First: Remember to read the parable of the Zen Master and the Boy.

Make your own Predictions! You could get $50

Second: Before reading below, take a chance at winning $50 by making your own news years predictions here! No peeking! Winner chosen at Random.

What about 2011?

Third: How did last years predictions turn out? Here they are:

1. Housing transaction volume will be up, slightly, in Massachusetts.

Hooray for me! Looks like I've got this on in the bag. Last years's SF transactions in MA - 37,236. This years, through November, 35725. That's a difference of 1,511 for an EVEN year, so we'll need 2500 or so necessary for that to be true, which we should do easily. (2500 would be up 3%).

2. Prices will be up, 2-4%

Swing and Miss here. Prices, as far as I can tell, are flat. (Why don't I know? There's no good way to measure them, but I'll have a fix for that next year, I think.) They might have gone up 1-2% in some markets in the spring, but gave some back in the fall. I think some towns did manage to hold on to their price increases, some may have seen more weakness. But it's not a big move either way, certainly not 3%. What went wrong? Well, it wasn't interest rates. They should have helped, but I think they are so low that you just can't get much more push out of them. It's likely that jobs didn't improve enough, fast enough, or consumer confidence didn't get high enough, fast enough (they are both pretty intertwined). Either way, there was certainly price PRESSURE in a number of markets (over half) but not enough to move the pile.

3. The spring and the fall markets will be more even this year, resulting in disappointing stats in the first half, but encouraging ones in the second half.

Ok, two out of three ain't bad. The year-over-year numbers in the second half were a double-digit improvement for five months in a row, and December should make it six. Give the man a cigar!

2012 Predictions for Real Estate In Massachusetts

Well, I'm swamped with buyers at the moment, many very frustrated at the inventory of what's out there. (Inventory is down 10% from November 2010- that's a lot when buyers are increasing.) I don't really think there's going to be much more property than last year to choose from, so:

1. Housing Transaction Volume will be up, slightly. No real change in how many people can sell just yet will keep a lid on volumes.

2. Prices will be up 2-4%. Because of 1, price pressures finally break through and we see a rise. Small, but it'll be there.

3. Rates rise, but not much. Say good-bye to the 3.99 or 3.85 that some of you were lucky to get. If the economy picks up significant steam, we'll see rates go up. Now, Europe is a mess, and everytime the news is bad in Europe everybody and their sister buys US Treasuries and rates fall. And Europe isn't getting cleaned up in a month or two, the bad news is going to be kicking around all year, I suspect. But with so many people already owning Treasuries, it will take very little additional Geo-Political improvement to get people selling Treasuries (especially since they pay you 2% at the moment). So, I figure once the high 3's are gone, they're gone for good, but we'll stay under 5 by year end.

*All quoted data from MAR

Do Good Things Today!

Matt Heisler

What is the Case Schiller Index in Real Estate?

The Case-Schiller Index is a widely quoted estimate of residential real estate trends in over 20 metro areas. It was developed by Karl Case and Robert Shiller, who were frustrated with the accuracy of the "median prices" for housing that were commonly used previously to measure the price changes in various markets. It has been adopted from it's original format to encompass a much larger geography over the years, and has been in widespread use since the mid nineties. It is used by mortgage lenders, rating issuers, and other industries, to attempt to assess the risk in any measured housing market.

How does Case Schiller Index Measure Home Values

The Case Schiller Index measures home values in a unique conceptual way. It looks at prices of the same houses over time when they are re-sold. So if a home sold in 1995 for $200,000, and was resold in 2005, for $250,000, then it increased in value by 50,000, or by 2.226% each year for 10 years. From that point, and looking at many resales, they can make an attempt to understand what is happening in the markets that they track.

How Accurate is the Case Schiller Index in Measuring Home Values

Well, that's a good question! The only way to really know is to have a better estimate for such a thing, but since the Case-Schiller was primarily measured against "median home prices" in terms of accuracy, it easily won out. Why? Because "Median Home Prices" is a very poor way to measure how expensive real estate is.

What are the potential problems with the Case Schiller Index and Median Home Prices

The problem with Median Home prices is that it measures both how expensive housing is as well as which houses are selling. In residential real estate, not all houses sell at the same rate. Sometimes the "bottom" of the market is seeing high transaction volume, and sometimes the "top" of the market is seeing higher transaction volume than is typical. We actually just went through this period quite recently in 2010, and the reason was a large separation between the rates on Jumbo mortgages and normal residential loans. When the banks went into the credit crunch at the end of 2009, they decided they needed to charge higher rates for so-called Jumbo mortgages. These are mortgages that are so large, the government won't insure them against default. Normally, Jumbo mortgages are 1 or 2 percentage points higher than typical government loans, but when things got crazy it was closer to 5 or 6 points for a jumbo. This huge "spread" in interest rates, combined with the extra government incentives for first-time buyers (who were given money to buy inexpensive homes), meant that the number of "low" priced homes sold went way up - at the same time the number of high priced homes went way down. This had the affect of drastically moving the "median" home price in most markets, even though prices didn't budge very much in this area. Although this is a drastic example, it's quite common to see the top and bottom of residential markets move in different directions, and that's why Median Home Prices is an especially poor way to judge home prices.

Now the Case-Schiller is better. But it's not perfect either. First of all, it relies on a relatively small amount of data - instead of looking at all the home sales in an area, it only looks at ones that have "re-sold". And it basically (as far as I can tell) assumes nothing about the home has changed in a material way. Unfortunately, the problem there is homes are always changing, even when they aren't changing! A roof gets older every year, and the closer it gets to the end of it's life, the more of an impact it has on the home itself. At a minium, there's cosmetic dating, infrastructure aging and improvements, expansions, lot reductions (people taking a big lot and selling it off will impact the property). Basically, lots and lots of changes that are happening to many of these properties. Maybe Case Schiller works better because these things "even out" over time, but until there's a better metric to compare it to, we're stuck with this one.

Is there a better way to measure how expensive real estate is?

I would argue there is. Appraisers use it all the time, and since their job is evaluating properties value, it may make sense to look at it. It's the metric called dollars per square foot, or $/sq. ft. It has it's problems too - especially over small data sets - but the larger the data set is, the more accurate it tends to get. Prices per square foot jump around a lot by house style and age, but the distribution and sales patterns of those homes tends to be stable (most towns aren't adding new houses very quickly, so the "mix" of homes in the town is stable), so it does usually work itself out. First off, it moves around much less than "average median prices", because the differential between what buyers pay on a square foot basis for small properties and large properties isn't very big, numerically speaking, so it tends to be much more stable. And unlike Case-Schiller, it takes into account property improvements (or lack there of) in a real time basis. For example, if I had a 1000 sq foot home that I could get $200,000 for, and then I added a big family room of 300 sq feet, my 1300 sq foot home is now probably worth closer to $240,000. My $/sq foot actually goes down in this example, but not by much, and probably correlates well with the actual market change. In my book, how much you have to pay a square foot for a home determines how expensive a town is, so it's what I use most often.

Why aren't their any indexes that use $/Sq foot?

Well, there aren't any popular ones. But the real estate websites like Trulia and Zillow are starting to collect that data. I just looked at Ashland, for example and saw that they have the data, but it's not smoothed out very well. (It means they aren't looking at enough data points for each point).  It's worth saying that both pricing models require that certain variables "average out" and so neither is perfect.  I do like $/sq foot because you can do it over smaller data sets and smaller geographic areas quite accurately, which is what I need to do!

So in Summary, there's no perfect metric out there, and there are a lot of biases built into any numerical summary.  Be careful what you infer from the headlines!

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Matt Heisler