Mixed Signs In Mass. Housing Market
There are mixed signs in the state’s housing market. Foreclosure petitions — the first step in the process — have dipped to their lowest level this year. But according to the Warren Group, more petitions were filed last month than in June 2011.
The Massachusetts Association of Realtors says its market index is up 103 percent from last year. While home prices are also higher than this time in 2011, they’ve dropped over the past two months, so it’s still a volatile market.
Housing expert Barry Bluestone monitors the housing market as the director for the Dukakis Center for Urban and Regional Policy at Northeastern University. He joined Morning Edition Monday to talk about the market in greater Boston.
Bob Oakes: Professor, every year you produce the Boston Foundation’s annual housing report. You’re working on the numbers right now, though they won’t be out until the fall. How would you characterize the housing market at this moment?
Barry Bluestone: Well, I think what the numbers are showing us is that prices have fallen a little bit, but they are looking like they are stabilizing now in the home buying market and they are actually rising a little bit in the condo market.
What has really picked up are sales. The reason why sales are picking up is that this is a very special time, when prices appear to be at the very bottom. We’ve never seen mortgage rates lower than this — possibly in history, [and] at least in this century. So people are beginning to see that this might be the right time to buy. Prices are not going to go much lower and will probably start to rise. And if anything, mortgage rates will go up. So if you can get into the market, [and] you’re looking for a home or a condo, this may be the best time to buy that you’re going to see in a long time.
Do the numbers show you, or does your gut tell you though, that a lot of people that could be in the housing market — a lot of potential buyers that could be in the housing market — are still reluctant to buy, despite relatively low prices and some record-low mortgage rates?
Absolutely. What happens is because so many people are staying in the rental market, young people who could be moving into the home buying market but are still nervous about prices — or perhaps can’t even find the credit because credit has become much more difficult to get — are staying in the rental market, [thereby] pushing rents up.
You have a number of homeowners who have still found themselves foreclosed out of their homes, who aren’t homeless but are also in the rental market now. And you also have a lot of graduate students who are coming to Boston-area universities looking for rental housing.
Those three forces — foreclosures, young people still in the rental market [and] graduate students — have pushed rents up in greater Boston to their highest rates ever. In fact, today I just looked at the numbers, something like 25 percent of all renters are spending a half or more of their gross income on rent.
How long can that be sustained? [Can] people indefinitely continue to pay a huge amount of their monthly income, and a growing amount of their monthly income, to rent? What are the long-term problems there?
Well, what we’ve always been concerned about is that [we do not just have] a low level of housing production in greater Boston — we are the lowest of the top 20 metro areas in terms of new housing construction. That rents continue to rise and make it more and more difficult for young people to stay in the greater Boston area.
They would love to be here because we’ve got great amenities. They would love to be here because there are jobs. But more of them are finding it very difficult to pay the rents here, and are looking for less expensive places to live in places like the Carolinas, out in Oregon [and] Washington, or the southwest.
And that threatens our well-being in the long run because we need to keep young people here. Massachusetts is becoming very old — we’re getting old very quickly. We need all the young people we can keep around here to do the work and to pay the taxes. And therefore these skyrocketing rents and still very high prices can be a deterrent to keeping young people around.
Let me ask you about foreclosures. We’ve said that foreclosure petitions have dipped to their lowest level this year, but do you expect foreclosures to be on the rise again in greater Boston? Or will they continue to stay low? Have we seen the worst [of the foreclosures]?
Well they are not low by historical standards; they’re low by recent standards. And I would suspect that if we can continue to grow the economy — [there is] an unemployment rate of just six percent in Massachusetts — so that people are able to hold onto their jobs, and if prices begin to rise again so fewer people are under water, the number of foreclosure deeds will remain at the current level. I don’t expect them to go much higher during the rest of this year.
Alright, let me ask you about housing supply: the number of homes on the market. Will that stay steady or do you expect that to grow in the coming months?
The supply has been relatively low. I think part of the reason is that homeowners who are not pressured to sell right now are holding off on the marketplace, hoping that prices will rise over the next six months or so and they’ll be able to get a higher price for their homes.
Our vacancy rate is down to about 1.4 percent in greater Boston — a normal vacancy rate would be about two percent. And at those vacancy rates –around 1.4 [percent] — that’s when you start to see home prices rise. That’s what I expect to see for the rest of the year.
A quick question on that as we close. [Will] home prices and home sales continue to inch up as they have been in recent months?
Certainly home sales are rising relatively rapidly, at least compared with the extremely low levels of a year ago. But home prices are just stabilizing, and I think that as demand picks up we’ll start to see home prices rise up as well.