1. The Massachusetts Housing Challenge Barry Bluestone Center for Urban and Regional Policy Northeastern University Greater Boston Real Estate Board LINK Forum January 19, 2005

2. Understanding the Massachusetts Economy & Housing Market  Employment  Household Income  Demographic Trends  Cost of Living  Housing Trends

3. How is Massachusetts doing … economically?  By the September 2005, employment in Massachusetts was still down by more than 160,000 from its pre-recession peak  Real median household income dropped by 3.5% between 2000 and 2004

4. Employment Trend

6. U.S. vs. Massachusetts

7. Greater Boston MSA Real Median Household Income 1969-1999 ($2004)

8. Greater Boston Real Median Household Income ($2004) 20002001200220032004

9. How do the demographics look?  We are losing population to out- migration  The largest net losses in population were in the young prime age cohorts

10. Greater Boston Population 2000-2004 20002001200220032004

11. Massachusetts Net Migration 2000-2004 2000-01 2001-02 2002-03 2003-04

13. Where did they go?

14. What’s doing with the Cost of Living?  According to a new measure of living costs, Greater Boston has the highest cost of living of any metro area in the United States  A family of four needs $64,656 to pay for the costs of housing, transportation, day care, health care, and other basic necessities.  This is more than $3,000 higher than in Washington, D.C; $6,000 higher than in New York City; and $7.000 more than in San Francisco  Monthly housing costs are 40% higher than in Austin, Chicago, and Miami and 63% higher than in Raleigh- Durham-Chapel Hill

16. A Tale of Two Cities Basic Budget 2 Parents, 2 Children Boston Monthly Housing$1,266 Monthly Food$ 587 Monthly Child Care$1,298 Monthly Transportation$ 321 Monthly Health Care$ 592 Monthly Other Necessity$ 500 Monthly Taxes$ 824 Monthly Total$5,388 Annual Total $64,656 Raleigh-Durham-Chapel Hill Monthly Housing$ 779 Monthly Food$ 587 Monthly Child Care$ 866 Monthly Transportation$ 358 Monthly Health Care$ 368 Monthly Other Necessity$ 369 Monthly Taxes$ 350 Monthly Total$3,677 Annual Total $ 44,124

17. Greater Boston Median Single Family Home Price 1987-2004 Source: The Warren Group Publications

18. 2005 Class A Apartment Rents Source: Forbes Magazine

19. 199820002001200220032004 Below $100,000400000 $100,000 - $199,999 824114500 $200,000 - $299,999 506874624319 $300,000 - $399,999163242526174 $400,000 - $499,99941012223033 $500,000 - $999,9994918192533 $1,000,000 and Above000011 # of Communities with Median Single Family Sales Price

20. 199820002001200220032004 Below $300,000 85.0%68.1%55.0%41.9%26.9%11.9% $300,000 - $499,999 12.5%26.3%33.8%46.3%56.9%66.9% $500,000 and Above 2.5%5.6%11.3%11.9%16.3%21.3% % of Communities with Median Single Family Sales Price

24. YearTotal Units Permitted Units in Single Family Structures Single Family Units as % of Total Units in 2-4 Unit Structures Units in 5+ Unit Structures 199810,8468,63979.70%5741,633 199910,6627,77572.90%7462,141 200010,3427,10268.70%7012,539 20019,7016,31365.10%6862,702 20029,5206,40867.30%7642,348 200312,1216,02049.70%1,0935,003 200413,5567,000 51.60%9945,562

25. Housing Price Forecast – New England Economic Project  Double-Digit Appreciation from 1995- 2004  2005: Appreciation of only 1-3%  2006: Average Price Decline < 3%  2007-2009: Average Price Increase: <3%/year

26. NEEP Housing Price Forecast History Forecast

27. Conclusion – No Short Term Bubble  Housing production has improved in Greater Boston over the past three years, but total production in 2004 was still at only 72 percent of the level needed to slow housing price appreciation to normal levels if economy were sound  In the short run, limited housing supply will keep home prices from collapsing

28. Conclusion – Long Term Challenges  In the long run, economic weakness, slow job growth, and demographic flight could lead to much weaker housing markets in Massachusetts  And don’t forget about a troubled national economy … with soaring federal debt, massive trade deficits, and increasing international competition for investment and raw materials