As we enter into the fall market, it is a great time to gauge the market direction. Are home values correcting? Will there be a bubble? Are we in a housing crises?
Let’s Listen to the Experts
The Joint Center for Housing Studies of Harvard University released the 30th anniversary of State of the Nation’s Housing series. The good news is about an uptick in homeownership in 2017 for the first time in 13 years. Despite rising market values, low interest rates have helped keep monthly costs affordable for homeowners. However, going forward, rising interest rates, lack of inventory, and rising student loan debt raise important concerns.
This chart shows data for Boston, Cambridge, Newton
The report continues with an in-depth analysis or the national housing market, both residential and rental, by measuring at the movement in various price sectors, demographic drivers, construction activity, and more. The forecast for market values is optimistic overall with continued climb in home prices. You can read the full report for more details.
The analysis examines how some of today’s conditions echo the past and are a yardstick for the progress we as a nation have and nave not made in fulfilling the promise of a decent, affordable home for all. Excerpted from the Executive Summary.
Throughout the report we revisit the many reasons why we are not seeing “decent, affordable home(s)” for all. Rising housing costs, rising land prices have kept older homeowners from moving resulting in fewer older homes on the market. New construction has also been limited.
Barriers to New Construction
There are 4 major impediments to homebuilding:
Shortage of skilled workers
Rising cost of building materials
Scarcity of developed land
Local zoning and other land use regulations constraining the type and density of new housing allowed.
Housing experts tick through a list of reasons for the slow pace (of new construction): There’s tougher zoning, there’s not enough undeveloped land, lumber is expensive … and one of the biggest problems, a labor shortage. ~ Excerpted from NPR.org
Great Boston Area Market
The severe lack of inventory in Boston, Cambridge, Somerville, Newton and surrounding areas makes it difficult to predict the direction of the market. The challenge of finding an affordable home in close proximity to urban centers will continue. Compared to the 25 largest urban areas in United States, Boston has the smallest percentage of land.
The real crunch in supply is for so-called starter homes — a home meant to be affordable, smaller in size — perfect for that first-time homeowner. But across the nation, builders are focusing much more of their efforts on high-end construction. In Boise, for example, 65 percent of homes for sale are on the upper end of the market. Thirty years ago, half of all homes on the market were smaller and less expensive, according to this year’s State of the Nation’s Housing Report from Harvard University. In 2017, that percentage had fallen to 22 percent, or less than a quarter. NPR.org
Given the housing boom in the Boston area, a change in the prevailing anti-urbanization and anti- development attitudes will support construction of more entry-level homes and fewer rental units. Careful attention to zoning laws and restrictions should be reviewed, keeping in mind the need for affordable (entry-level) housing and homeownership.
The bottom line is that we are seeing a stable market. Properties on the high end of the market will see more days on the market as we settle into a more balanced market. Due to lack of inventory, buyers will face challenges. With the counsel of a qualified real estate professional, you can achieve your goals of buying, or selling and buying.
The number of multigenerational households is growing according to 2015 American Community Survey data by the Joint Center for Housing Studies of Harvard University. With the aging of the Baby Boomer generation, the share of older adults living in multigenerational homes has been growing steadily since the 1980’s. Many elders want to age in place and living with adult children (25 or older) and this allows for a higher quality of life. This also takes into consideration the larger number of adult children who are choosing to remain at home.
The data reveals that fewer adults age 30-40’s live with other generations. The number increases again with ages 40-50’s with the “sandwich” generation, those adults living with both elders and younger adult children.
Because adult children move out and elderly parents pass away, the share of people living in multigenerational households declines for people who are in their 60s and early 70s. However, the share rises steadily for older adults in their mid-70s, who often are starting to face more daunting health and financial challenges. Among the oldest age groups (aged 85 and over), 27 percent – about 1.5 million people – lived in multigenerational households in 2015. ~Housing Perspectives Blogspot
There is incredible opportunities for home builders on 2 levels.
Solutions for consumers considering home improvements for their multigenerational family.
Growing need for new construction or renovations for adults who are looking to down-size.
Massachusetts October Heat Map for List Price by County
Boston is one of the best places in the country with a consistently strong housing market. Today’s sesseion of The Greater Boston Real Estate Board’s Economic Expectation Forecast for 2017 GBREB.org was packed with optomistic data setting us up for a strong housing market going into 2017. Jonathan Smokey, Chief Economist for Realtor.com gave a lively presentation especially for an economist as he more or less pointed out a few times.
Real Estate is a seasonal business
October Median List Price by County
June, July, and August typically see about 75% of the real estate sales for the year. Then once school starts and the holidays kick in, we experience a decline in activity. NOT THIS YEAR! The market is strong although volume of inventory is a problem.
The Boston Market is “raging”
Smokey spoke of a “raging” market in Boston. Raging implies growth. A raging market is a dynamic one. If is fun but dangerous and shifting. Product mix is shifting. Demographics are shifting.
If you want to hear more, contact me or follow me on Twitter @Janetsville. You can also follow Jonathan Smokey @smokeonhousing
August 2016 Newton and Brookline have been football rivals for many years. Looking at the housing market both locations have similar qualities, making them desirable communities for homeowners. Newton and Brookline both have highly rated school systems, low unemployment rates, and are in close proximity to Boston Proper. Both neighborhoods have attractive homes on tree lined streets and feature village centers with many local shops and restaurants. Demographics are quite similar with the Income Per Capita landing at $64,475 for Newton and $62,148 for Brookline. Bottom line is that both Newton and Brookline have a strong housing market with appreciating home values.
ALL THINGS NOT BEING EQUAL
Type of Homes–Newton has more single family homes and Brookline more condominiums. As of August 2016, Newton has 399 single family homes, with a median price of $1,129,500 and 246 condominiums with a median price of $699,000. Conversely Brookline has 116 single family homes sold with a median price of $1,720,000 and 355 condos with a median price of $770,000.
These number all represent annual sales January to August 2016.
Population and Density–The City of Newton has a population numbering 86.9K and the population density per square mile is 4.87K. While the Town of Brookline is smaller population of 59K and the population density per sq. mile is 8.74K.
Would you to have more of this type of information for any city or town? Call Janet.
Some industry pundits are saying that the housing market may be heading for a slowdown. One of the data points they use is the falling numbers of theHousing Affordability Index, as reported by the National Association of Realtors(NAR).
Here is how NAR defines the index:
“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”
Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.
The higher the index the easier it is to afford a home.
Why the concern?
The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. Here is a snapshot of the index since 2009:
But, wait a minute…
Though the index has decreased over the last four years, we must realize that at that time there was an overabundance of housing inventory and as many as one out of three listings was a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.
The market is recovering and values are coming back nicely. That has caused the index to fall.
However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008. We can see that, even though prices have increased, historically low mortgage rates have put the index in a better position than every year for the nineteen years prior to the crash.
The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.