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Boston housing vacancy rates and housing prices

Posted on May 15th, 2015

When buying a house in Boston, the housing prices and the homeowner vacancy rates are related. As the vacancy rates decrease the demand for the fewer units drive up prices. The housing price increase before 2005 across all metro areas in the U.S., including greater Boston is attributed to a low number of properties that were vacant. This was estimated at less than 1% of the single family housing stock in greater Boston and less than 2% in other areas of United States. It suggested from a statistical evidence that when vacancy rates are under 2% single-family home prices tend to go upwards.

In the Boston real estate market the vacancy rate is still below 2%. It’s not surprising that single family home prices are continuing to go up and many of the towns and regions of this area. With younger millennials and the aging baby boom generation less interested in homeownership or don’t have enough income mortgage, the vacancy rates are going to continue to rise for single family homes. This will reduce price pressure in this segment of the market for housing. When buying a house in Boston, you should take this under consideration.

The Warren Group which uses data to track all housing sales in the greater Boston area reinforces the estimates about the future for single family housing prices. The Case-Shiller index follows changes in sale prices of individual units over time. This is a better measure of the actual housing price appreciation since it does not

The Case-Shiller index follows the change in sales prices of individual homes over time. As such, it is a better measure of actual housing price appreciation because it does not combined changes in prices with changes in different types of homes for sale. The Warren Group measures the change in the median sales price of the homes in a community. In one period if homeowners are in the market for more expensive homes, but in another period and there’s a larger share of homeowners looking for more affordable housing the change in the median price can reflect a change in the type of housing that people are purchasing. The value of this data is that it’s a measurable indication of the home price appreciation for various cities and towns which the Case-Shiller index does not look at.

The data from the Warren Group saw a steep 9.4% increase in median single family home prices from the years 2012 to 2013. The prices for the first three quarters 2014 went up by a margin of 1.2%. This was from $381,000 in the year 2013 to $385,000 just a year later. If you combine this with the Case-Shiller index, it suggests that in 2014 people were looking for more affordable units to buy and in more communities in which they could afford a home. In the years, the cost of single-family homes will depend upon regional changes in demographics, economic trends of the country, and mortgage rates. As the millennial generations continued to prefer urban style living and a baby boomer generation ages, the demand for single family homes may decline as preferences and tastes in housing begin to change.

There’s evidence of a slower recovery in the single-family home prices which can be detected in the Case- Shiller data indexing. In 2005 there was a collapse in home prices in the metro Boston area. This has been more erratic and it will be of longer duration than the last housing price cycle which saw declining prices in 1988. During the first 10 year cycle from the years 1988 to 1997 the prices fell for 43 months before they began to recover. Within 39 months the prices were back to 90% of the peach previously. After another two years the prices were back to the peak

In the current cycle it took 43 months for prices to reach their lowest point. During this cycle prices have taken a more erratic path and have taken longer to recover. The median prices of single family homes were no higher in February 2012 than in April 2009. The median single family home selling price has not reached the peak of 2005. The home price index did show signs of slowing towards the end of 2014 which was between the months of June and September

The single-family home price remains flat and this is a reflection of preferences, shifting demographics, and choices in the market. Baby boomers in the years 1988 through 1997 were having children and they were buying single family homes, but now they’re looking for something smaller. There’s also the case of millennials are not interested in suburban living. They’re driving down demand for single-family homes which were plentiful and popular since the end of the Second World War.