Posted on July 5th, 2015
Buyers may be bidding on homes or going to open houses, but in the Boston real estate market, the number of homeowners is going down. Across all income ranges in the Massachusetts real estate market, rates of homeownership are falling since they peaked in 2006 during the last real estate boom.
The largest decline is those that are middle-income earners with salaries around $50,000-$120,000 per year. Rates of homeownership for this class dropped13 from their 68% highs in 2006, according to Zillow. Bother the bottom and the top of the wage scales have seen a drop in home ownership. Across the country the homeownership rates are also falling and sinking to 63.8 % which is the lowest since 1995.
Why It’s Occurring
• The soaring prices are one of the major issues as many simply can’t afford to buy a home. It’s too expensive to buy a home in Boston and many towns and cities have gone past housing price records set in the mid-2000s.
• Those making $80,000 per year could only afford about 23% of listings last year according to a study of the Boston real estate market done by officials. Because of the this affordability crunch Boston Mayor Marty Walsh is looking at plans for housing that targets the middle-income buyers which is the group that has seen the most decline.
• Lower income earners below $50,000 are also hard hit in Boston. In 2013 the homeowner rate dropped to 38% which is down 40% form 2006 indicated by the number provided by Zillow. There are not many affordable mortgages in the lower income range and many rental options are poor.
Less Homes for Sale
Buying a home in Boston is difficult due to the fact that there are fewer homes actually for sale. In Spring 2006, there were 40,000 homes across the state. By March of this year there were only 14,862 homes available for sale according to the Massachusetts Association of Realtors. This is a 20% drop from the 20,000 homes available in 2014.
There are fewer homes being built too as building permits are down 65% in 2015 so far according to the U.S. Census Bureau. The low inventory of homes is discouraging people that want to actually sell from listing their home because they may not be able to find one to move to.
Raise in Mortgage Standards
Boston housing prices are also impacted by new tougher mortgage standards. Before the housing crash and crisis it was easier to get a mortgage. Between the late 1990s and 2006 homeowner rates went up. Those that had never owned a home before too advantage of too much credit being offered and received a dubious mortgage which helped lead to the housing problems and crash in 2006. Since the crash lenders have ramped up the standards for mortgages
More people are interested in renting and this is very strong among millennials which has led to the drop in those wanting to buy a house in Boston. Student debt has also contributed to the need to rent and although the job market is improving somewhat, those that rent are just not able to buy yet as they don’t have enough funds for home ownership. There may be more of them buying in the near future which could improve the housing market.