The urbanization of the residential real estate market is a well-reported trend. Boomers are downsizing and moving closer to amenities; Millennials are putting off purchasing homes and stick close to transit hubs.
While that may be true for the majority of those generations, there are quite a few residents of Massachusetts in the age cohort between the retirement and college graduation – and they are buying houses.
Unfortunately it is also true that Massachusetts has a housing shortage that is not going away any time soon. The simplest application of the rules of supply and demand lead to an inevitable conclusion: home prices in the Bay State are rising rapidly with no end in sight.
And yet the market continues to thrive. According to data from The Warren Group, publisher of Banker & Tradesman, June 2015’s median single-family home price was $365,000 – just $5,000 less than the most expensive June in 15 years (2005). Year-to-date we’re just $17,000 off peak ($335,000 for 2015; $352,000 in 2006).
Great news, right? Yes, if you bought in 2009 (year-to-date $275,000, the lowest point of the recession). Not so great for potential buyers now, who must contend with tightened lending restrictions and debt-to-income requirements.
The average age of a first-time homebuyer last year was 31, a number largely unchanged from previous years. Thousands of Millennials are turning 31 every day; they are clearly not opposed to buying houses.
While some parts of the nation (and indeed some parts of Massachusetts) continue to struggle out of the mire of the recession, generally speaking, our fair commonwealth has, in just six years, shaken off the muck and come roaring back. Single-family prices are well on their way to pre-recession peaks; condos have already surpassed them. June 2005, 2006 and 2008 tie for the highest pre-recession median condo price at $295,000; in June of this year, the median price was $332,500. Year-to-date 2006 had the highest median sale price with $284,000; year-to-date in 2015 is $315,000.
It won’t be long before home prices exceed pre-recession peaks and crest into the most expensive they have ever been. It may be as soon as this year. Booms and busts may be natural, but they are also unsustainable.
Nothing changes; nothing stays the same. Industry observers are picking up the conversations dropped 10 years ago – namely Massachusetts’ housing supply problem and the sky-high cost of living that accompanies it. These are important – even vital – conversations. If a way cannot be found to increase supply, the economic future of the entire state is at risk.
