While there are considerable causes for optimism about the national and state economies — and the housing market — considerable long-term challenges remain, two economists told an audience of Realtors at the Federal Reserve Bank of Boston today.
The presentations, by UMass Dartmouth professor and executive director of the university’s Center for Public Policy, Michael Goodman, and David Stiff, principal economist for real estate data and analytics provider CoreLogic, provided an in-depth forecast of the broader economic trends affecting the Bay State’s housing market.
Both experts were positive on the overall Massachusetts economy, which has outperformed the nation during the recovery from the Great Recession. “Overall, the economy here in Massachusetts is growing, even if it doesn’t always feel that way,” explained Goodman, “We’re having a lot of growth, but that growth is imbalanced.”
Stiff, too, predicted a period of slow-and-steady growth for the U.S. economy and the housing market, with households having paid down considerable debts and U.S. corporations experiencing record profits and indicating plans for near future growth, and job openings increasing around the country. However, both economists pointed to continuing slack in the labor market as a concern, with many people who have been out of work for six months or more finding it increasingly difficult to re-enter the labor market, even as job openings have increased.
Continuing economic and political turmoil across the globe also presents risks — the United States’ economy has fared best in the developed world in its recovery from the recession, and while companies here are optimistic, their counterparts in Japan and Europe are facing renewed prospects of recession. That global gloom could have some benefits for housing markets locally — Stiff predicted that the sluggish growth in the rest of the world would likely keep interests rates at home below 5 percent though the beginning of next year — but it’s also possible the U.S. economy will be dragged down by the rest of the world’s malaise.
Locally, the economy and the housing market have continued to improve and are doing better than the nation as a whole, but those improvements are strongly regional, Goodman pointed out, with some parts of the state doing much better than others.
“Our industrial mix helped us recover better from current recession, but that has mostly rebounded to benefit of greater Boston,” he said, with many “innovation economy” jobs that have fared well in recent year in fields like technology, medicine and education concentrated near the Hub.
“There’s a divergence of destinies among regions and demographic groups,” he explained, saying that while in many communities near Boston home prices are well above their previous peaks, some of the communities hardest hit in the housing crash are still seeing prices 30 percent below where they were in 2005.
Ninety percent of permits for new home construction in Massachusetts, Goodman pointed out, are being pulled within the Greater Boston area. In the 1990s, only about 50 percent of new homes in the state were being built in Greater Boston, he said. Even with the increase in building in and around Boston, he said, overall new construction levels are still below historic levels.
“Massachusetts simply does not produce enough new housing to meet the market demand,” Goodman said, blaming Massachusetts’ town-level government structure and archaic zoning laws for the shortage.
If the state does not address this, over the long-term housing affordability problems will continue to worsen, he said. Many people are already shut out of purchasing in the state’s more desirable communities, he suggested.
The event was hosted by the Greater Boston Association of Realtors.
