While Massachusetts housing prices have fallen over the past two years, shifts in nationwide housing prices have left the Bay State "less affordable than ever," a Northeastern economist said Wednesday morning.

Barry Bluestone, director of the Dukakis Center for Urban and Regional Policy at Northeastern University, told a NAIOP Massachusetts forum that without a sustained uptick in homebuilding, housing prices will snuff out a nascent local economic recovery. However, the president of National Development, Thomas Alperin, argued that absent meaningful subsidy, most multifamily developers will stay on the sidelines for the foreseeable future.

Bluestone said while housing prices in Massachusetts have become "more affordable in absolute terms," higher rental rates and a "good, solid recovery in home prices" since March have actually decreased the state’s level of affordability, compared to the rest of the nation. He argued the country’s most expensive metro areas are pricing themselves out of the market, causing out-migration and hampering employment growth.

"We’re going to need more permits and more construction," Bluestone said. "Relatively, we’re less affordable than ever. If we don’t have enough home construction, and affordable housing for young families, we may continue to price ourselves out of the market. It could be very dangerous."

Alperin, whose firm developed Station Landing in Medford, said he doesn’t expect to see much new multifamily construction over the next few years, because of the high cost of capital and increased loan-to-value requirements.

Developers need to generate a return on cost that’s 150-200 basis points higher than it was two years ago, Alperin said.

"You can’t even get close to that number. You’d probably need a 15-20 percent increase in rental rates to rationalize new construction at that price," he said.

Without a spike in economic growth and a meaningful reduction in cap rates yield requirements, or higher levels of leverage or subsidy, Alperin argued, "It would be very tough to see any developer making a rational decision to put a project in the ground."

Bluestone also told the NAIOP forum while he was "quite pessimistic" about the economy last year, "I am now quite impressed with where we are. We’re going to see better times, certainly in Massachusetts."

Bluestone found cause for optimism in what he labeled some "pretty dim" state employment data. In July, employment in Massachusetts stood at the same level it did in 2003; employment in the Bay State peaked in February, 2001, and has been limping along ever since.

However, he said, the state’s unemployment rate has bettered the national rate by a full point, and job losses appear to have stabilized over the past four months. Based on that trend, Bluestone predicted that the state "will begin to see positive growth this year, and into 2010," pacing national employment gains by as much as six months.