Greater Boston’s housing market might be facing a period of more instability, according to a study to be released today by New England’s largest community foundation.
The Boston Foundation report says the region’s housing market could get battered from two directions, with continuing economic woes depressing house prices and driving up foreclosures, and Boston’s burgeoning student population pushing up rents.
Barry Bluestone, director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University and lead author of the report, said the Boston housing market was showing signs of emerging from the recession during the last half of 2009 and the first half of 2010; however, that progress could be threatened by a continuing weakness in the overall national economy.
Bluestone cited “disconcerting developments’’ nationwide, including the gross domestic product numbers, which fell sharply in the second quarter, and the growing ranks of the unemployed nationwide — both trends that threaten the troubled housing market.
Through July of this year, new home sales in the United States were running 8 percent below the same period last year, and 33 percent below 2008 levels. But with the end of the federal first-time home buyer tax credit in July, home sales nationally dropped 27 percent, double the consensus forecast. Foreclosures and bank repossessions nationwide have been running at record levels in 2010.
Bluestone said there are “too many disconcerting statistics that point to a continued weakness in the overall economy and the housing market.’’
Both Greater Boston and Massachusetts appear to be doing better than the nation as a whole on a range of economic indicators. For example, as of August, when the US unemployment rate was 9.6 percent, it was at 8.8 percent in Massachusetts. But, Bluestone said, “We are not an island unto ourselves. If the national economy continues to suffer, we will suffer its tailwinds.’’
Despite the sluggish economy, “anemic’’ new housing construction and a steady rise in student population have combined to drive rental prices “near their all-time high,’’ according to the Boston Foundation report. Normally, low vacancy rates and high rental prices occur in a strong economy; to have both in a weak economy is unusual, Bluestone said.
The rising cost of rental housing in Greater Boston is one of the major themes of the Boston Foundation study, its eighth annual Housing Report Card.
Bluestone said a number of factors are driving rents higher in the area. Many people who were evicted from foreclosed homes are now renting, and as credit remains tight, people are finding it harder to qualify for mortgages and make the transition from renting to home ownership. Finally, and most significantly, a boom in Greater Boston’s student population has swelled the market for rental apartments.
“The biggest rise is in graduate students,’’ Bluestone said, “and they are the students who are most likely to live off campus.’’
The Boston City Council’s president, Michael P. Ross, whose district includes the Back Bay, Beacon Hill, and the Fenway, said he has noticed the widening impact of students on housing. Some Boston neighborhoods are “now being gridlocked’’ by student housing, he said.
“The institutions have to develop more housing on campus,’’ he said, “and I’d like to see the private market develop more housing for students.’’
Bluestone also said more student housing, perhaps in villages, will be needed if Boston wants to stay ahead of the influx.
In the fall of 2009, there were 336,000 post secondary students living in Boston, with more than half living off campus, Bluestone said. That’s up from 290,000 in 2001. If the trend continues, there will be 400,000 students living in Greater Boston by 2020.
“If we don’t create more housing for them, they will have an even greater impact on the rental housing market,’’ Bluestone said.
The housing market is also under pressure in suburban communities, said Laurie Cadigan, owner of the real estate firm Barrett & Co. in Concord and president-elect of the Massachusetts Association of Realtors. Cadigan said that the lack of construction has affected the availability of “workforce housing’’ in the communities that she serves, which include Concord, Lincoln, Carlisle, and Arlington.
“There are a lot of properties available for over $1 million,’’ she said. “But it’s much tougher to find properties in the $200,000 to $500,000 range.’’
Cadigan also said she’s seen an increase in activity this fall as many sellers, still concerned about the economy, are “abandoning their wait-it-out strategies and setting more realistic prices.’’
D.C. Denison Boston Globe October 12, 2010