Last week we dwelt upon all the housing activity in Boston, particularly the condo and rental construction in Chinatown, Back Bay, Fenway and the Seaport District as well as the luxury sales in the likes of Back Bay. But this activity and these sales mean little in the grander scheme of the commonwealth, which is on its way to experiencing one of its worst years housing-sales-wise ever.
Single-family home sales in Massachusetts, including in the Hub, are unlikely to top 40,000 in 2011, which would be the lowest amount since 1991, in the wake of the 1980s housing collapse and the rise of Ace of Base (we made that last reason up). In fact, the commonwealth's housing market may be historically sluggish.
"The housing market is almost as bad as it has ever been absent the Great Recession,’’ Nicolas Retsinas, a real estate lecturer at Harvard Business School, told The Globe's Jennifer B. McKim. “We have a situation where the tried and true methods don’t hold water.’’
Historically low mortgage rates don't seem to be doing the trick; the first-time homeowners' tax credit, which expired last year, likely created an artificial lift as buyers rushed to take advantage of it; and the drop in values does little to spark sales (and it doesn't help matters that financing has become that much more difficult, even for prospective buyers with fab credit). In fact, right now it appears the housing market, both nationwide and closer to home, remains mired in a twisted Catch 22 (our favorite novel, by the way): consumers don't want to buy housing, often their biggest lifetime investment, until the economy improves; and yet the economy won't improve until housing picks up.
The flailing economy and a still elevated unemployment rate—7.3 percent in Massachusetts—are perhaps the major drags on housing. Young people can’t find jobs, so they are staying with parents, or sharing rentals, rather than venturing out on their own. Families, hit by unemployment or cuts in pay, are struggling to keep up with mortgages, extending foreclosures into rural and suburban areas. Meanwhile, many potential buyers are too worried about jobs and income to take the risk and responsibility of buying a home.
“Housing is likely the most powerful factor dragging the economy down at the moment,’’ said Barry Bluestone, dean of the School of Public Policy & Urban Affairs at Northeastern University. “There’s a crisis of confidence at this point and many prospective home buyers are sitting on the sidelines while others cannot meet new heightened credit requirements.’’
Everybody rent now. Oh, wait.
· Housing Market Still In Recovery [Globe]
· Rent Check! Boston Apartment Construction Booming [Curbed Boston]
· Boston's 5,000 New Apartments Won't Mean Lower Rents [Curbed Boston]
· Back Bay Superbroker Tracy Campion's Greatest Hits [Curbed Boston]