Massachusetts and Greater Boston are not immune to the forces that are negatively affecting the nation’s economy as a whole. Moreover, the analysis in these pages also concludes that until we solve the housing crisis, the larger economic crisis impacting our state, region and country will not begin to abate.
The Greater Boston Housing Report Card 2011
One of the major conclusions of this year’s report card is that Massachusetts and Greater Boston are not immune to the forces that are negatively affecting the nation’s economy as a whole. In fact, the leading economists we rely on for economic forecasts are concerned that we are in for some rough times ahead.
In past housing report cards we focused on how housing production, sales and prices were driven by the economy. However, in this Great Recession, there is a giant “feedback loop” between housing and the economy, with the depressed housing market actually driving the economy. Until the housing market recovers, there is little hope for an end to slow economic growth and high unemployment. Housing continues to be at the very center of the ongoing economic crisis.
However, here in Massachusetts and in Greater Boston, our housing market has not sustained anything near the collapse experienced in other states and regions. Production has not declined as much and prices have not plummeted as far. As such, since December 2007 the growth in economic activity in the Commonwealth has exceeded every state but one (North Dakota) and by the spring of 2011 had recovered to its pre-recession level.
- Housing production has declined to its lowest total in at least two decades and less than 30 percent of the most recent peak year (2005). The decline in housing production in the region has been most severe in multi-unit buildings.
- Comparing housing production in Boston with other metropolitan regions reveals a mixed record. Boston was in the middle of a nine-metro-area pack in 2011, but its position has slipped from 2010 when it had the smallest decline in permit activity of all.
- The state’s right-to-cure law was in place during two periods, allowing delinquent homeowners an opportunity to catch up on payments. The number of petitions for all types of homes remains high, but recent months have seen the lowest rate of foreclosure filings since 2005.
- In last year’s Housing Report Card, we noted optimistically that 2009 marked the first year in half a decade in which the number of single-family home sales in Greater Boston rose over the previous year. It seems now that such optimism was premature.
- The region’s vacancy rate has long been below the 2 percent national standard but has been inching upward of late. This increasing rate has led to another softening in the region’s home prices.
- It seemed that 2010 would mark the beginning of an upturn in home prices. Indeed, the median typical price for a single-family home rose nearly 4 percent in 2010 over 2009 levels. However, in line with the sales volume figures, this recovery seems to have been short-lived.
- In the midst of a weak economy, the average effective rent in Greater Boston set a new all-time record of $1,665 in the second quarter of 2011. With household incomes stagnant for all but the highest earners in the region, we expect no improvement in rental affordability in the foreseeable future.