Thursday, November 3, 2011

MARKET TRENDS: Housing prices key to recovery, study says

Stable housing prices are key to an economic recovery in Massachusetts and across the country, according to a new report sponsored by the nonprofit Boston Foundation.
The Greater Boston Housing Report Card 2011, scheduled to be released today, reflects a turnaround for its authors, who have long advocated for more affordable housing. Lead author Barry Bluestone, founding director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University, said the struggling housing market is “actually driving’’ the slow economy. Until the housing market recovers, he said, high unemployment and slow growth will continue in Massachusetts and elsewhere.
Bluestone added that high rents in the Boston area won’t begin to moderate until home prices start rising, enticing more prospective buyers to get off the sidelines and slowing the number of foreclosures. A combination of sparse inventory and high demand have pushed rents higher. In the second quarter, the average monthly rent in the Boston area reached $1,665, an all-time high, according to the report.

He is expected to present the report today to a cross-section of housing industry professionals at the Boston Foundation’s headquarters.
“We need to stabilize prices so people will go back into the housing market,’’ Bluestone said. “Then we need to create enough housing so that prices won’t accelerate.’’
The report found that because the state’s housing market has suffered less than those in many other areas of the country, the local economy also has recovered more quickly from the recession. But home sales remain weak and median single-family home prices probably will be lower in 2011 than last year.
Also, the report said, the homeownership gap between black and white families in Massachusetts has reached about 35 percent, one of the highest in the country.
Aaron Gornstein, executive director of Citizens’ Housing and Planning Association, a Boston nonprofit that focuses on affordable housing and contributed to the study, said that despite lower home prices, many people still cannot afford to buy because of underemployment and tight
financing requirements. “We need to try and stabilize the market, but also address the lack of affordable housing,’’ Gornstein said. “I don’t think they are at odds.’’
Tim Davis, a real estate researcher and also a report contributor, said consumer confidence is tightly linked to housing values. While he does not believe homeowners should rely on their homes as equity banks, like many did six years ago at the height of the market, an end to falling prices will prompt more people to start spending, providing a needed boost to the economy.
“We need to restore household confidence,’’ Davis said.
Jenifer McKim October 25, 2011

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