Home costs are called a drag on state growth

High home prices are limiting the Boston area's ability to regain the jobs lost in the 2001 recession and sustain economic growth, according to two new studies being released today during a conference at Boston's Federal Reserve Bank.

Massachusetts house prices are the third-highest in the country, according to the US Census Bureau, after California and Hawaii. The median price for a single-family home in Massachusetts has risen 78 percent from 2000 to 2006, to $325,000.

While it is well documented that the state's high housing prices make it difficult for many young residents to purchase their first home, few studies have attempted to connect housing costs to economic growth. Massachusetts employers often cite high housing prices as a major reason they expand operations in other states, where costs -- and therefore, the wages they pay -- are lower.

The new research also linked high housing costs to the state's population losses, an issue that has sparked debate among gubernatorial candidates in recent days over the most effective policies to stem the outflow of residents. Between 2003 and 2005, the population is estimated to have declined by nearly 19,000, despite an influx of immigrants.

''High housing prices are hurting our economy today because they are discouraging employment growth and encouraging out-migration of the population," said Barry Bluestone, director of the Center for Urban and Regional Policy at Northeastern University. In a study comparing 245 US metropolitan areas, he found the negative impact of high prices on the Boston metropolitan area's job growth was exceeded only by the impact on jobs in two California cities, San Francisco and San Jose.

A separate study, by Edward Glaeser, a Harvard economics professor, found that Boston-area prices were more volatile -- the peaks are higher and drops are steeper -- than prices in other US metropolitan areas. In Boston, he said, median sales prices during any five-year period can swing by an average $43,000 above or below the longer-term trend between 1980 and 2004. In contrast, Atlanta's average price swing was $8,200.

One factor that drove prices up sharply during Boston's recent housing boom was a lack of supply stemming from limits on development in the city and the suburbs, where it is often difficult to obtain permits and where historic preservation is often a barrier to building. When the economy grows and housing demand increases, prices rise sharply in response to growing demand.

''If you don't permit, you don't grow population and you don't grow jobs," said Glaeser, director of Harvard's Rappaport Institute for Greater Boston, a policy think tank. ''If you don't want to build, you've got to accept the fact that Boston is going to lose population, and you have to quit wringing our hands on this," he said.

Boston, he said, ''is becoming a boutique town for educational elites instead of an economically diverse city."

But Lawrence Yun, senior economist for the National Association of Realtors, a trade organization, said high house prices coexist with strong economic growth in many parts of the country.

In Washington, D.C., for example, house prices rose 66 percent between the first quarter of 2003 and the first quarter of 2006, a period in which employment expanded by a robust 8 percent. Orlando's 89 percent appreciation in house prices during that time coincided with 19 percent job growth.

Yun said a variety of factors influence decisions about where to live, including amenities or the weather, and whether businesses will expand, including tax policies and regulations, he said.

Boston's prices are high because it ''is a desirable place to live," he said. ''Certainly home prices will give companies pause about where to hire people, where to locate, but that's not the underlying reason."

In a survey of chief executives that appeared last week in the Globe, more than half of the heads of the state's largest companies cited high house prices as their biggest obstacle to local expansion. The state's job growth has begun to rebound, but Massachusetts employment in April, the latest figure available, still was 155,000 below the February 2001 peak in employment. Industries critical to the area economy -- finance, computers, and healthcare -- have not done as well as they have in other parts of the country.

Glaeser's research, conducted with Joseph Gyourko of The Wharton School at the University of Pennsylvania, found Boston's tight housing supply contrasts sharply with cities such as Atlanta, where swings in the housing cycle are less dramatic. That's because in Atlanta, economic growth and rising house prices naturally spur developers and contractors to build residences to meet the increase in demand for housing. In Boston's suburbs, prices go up sharply because the supply of homes is limited.

Boston's dramatic price increases also caused surges in growth in the ''innovation" industries, which drive up housing demand, such as high technology and biotechnology, which are less stable than more established industries.

The Internet boom caused incomes to surge and stock portfolios to bloat, which financed homes for high-tech employees. During the dot-com bust, hundreds of high-tech workers lost jobs and wages declined sharply. Biotech, which had slumped for years, is enjoying a resurgence.

Volatile house prices, he said, cause more short-term economic losses. ''Remember the chaos we went through 15 years ago, during the last boom-bust cycle, when so many players were affected when we lost 25 percent of housing values," he said.

Bluestone said the largest group leaving the state is in the age range of 25 to 34.

Often, these young professionals are seeking employment and are first-time home buyers, so they flee to lower-cost housing in places like North Carolina or Florida.

''If you have a society in which all the people are retired [or] are children, the question is who's producing the wealth. Holding on to your workforce, which is basically paying all the bills, is critical," he said.

Kimberly Blanton can be reached at blanton@globe.com.