The good news: The Greater Boston economy is strong – and has been increasing in strength over the past three years. Because of this, unemployment has been falling and more people are being drawn to the area.
The bad news: All these new people need places to live, making the demand for housing in and around the city very high. This increased demand has caused prices for mortgages and rents to skyrocket. There are a high number of building permits and residences waiting to be constructed, but they aren’t being built as fast as the people are moving in.
That’s the gist of the 2015 Greater Boston Housing Report Card, prepared for The Boston Foundation and aptly titled “The Housing Cost Conundrum.’’
Single-family housing prices in Boston fluctuated with the market’s ups and downs in the early 2000s, then the housing bubble burst. Since then, prices have been increasing steadily and quickly.
In 2013, Greater Boston housing prices rose 7.2 percent, in 2014 they rose another 6 percent, and they’re expected to rise another 6 percent in 2015.
But these price increases are not stopping people from moving in. The report notes that June 2015 vacancy rates in greater Boston were a mere 0.7 percent, lower than any time since 2004 and lower than the average vacancy rate for all other U.S. metro areas.
This low vacancy rate is doing exactly what you think it would: the people that already have homes are able to sell them to desperate buyers, which has subsequently increased the median home price in the past year.
The median single-family home price in Greater Boston in mid-2015 is $9,500 higher than 2014’s median.
And apartments have been following the same trend – vacancy rates are the lowest they have been in years, making rental prices go up. From the end of 2009 rents in Boston increased by more than 31 percent in the next three years and have recently started rising again.
Just between the end of 2014 and the beginning of 2015, rents in greater Boston have risen another 7 percent.
Story continues after gallery.
Massachusetts towns and cities where homes are selling really fast:
What does the future hold?
The report notes that there is some hope. From 2009 to 2013, the number of housing permits issued in greater Boston doubled, with an increase likely to continue in 2015. Many of these permits are for multi-family constructions, a sign that “developers are responding to the demographic changes in the region.’’
The problem is the lag time between applying for a permit to build multi-family housing complex and, you know, having a fully built complex that people can live in.
The report notes that if housing construction was able to keep up with the number of people moving to greater Boston, things would go back to a stable rate, where vacancy was normal and prices were lower – but many of these buildings in the works are not yet ready for occupancy.
There are two ways the Boston economy can go in the future.
Option one: If the number of residences does not increase quickly enough, the number of people moving here will slow down. “This could lead to a slowdown in price and rent appreciation, but may also compromise the region’s long-run ability to attract the talent it needs to fuel future economic growth,’’ according to the report.
Option two: If more housing is built, prices could go back to a stabilized state. But there is a problem, the report notes: “this may be quite difficult to do because the high cost of development in the region makes it almost impossible to build housing that is affordable to working families and other middle-income households.’’
We started with the good and the bad; there’s your ugly.