Why wasn't our bubble bigger?

Starting in 2001 or 2002, the Boston area essentially stopped adding new jobs to the economy (initial losses due to the bursting of the "Tech Bubble" followed by the glacial jobs growth we are experiencing today). Income levels are going up in Boston, but it takes jobs to generate population growth and without population growth there is less relative demand for homes. With fewer people competing for the homes that are on the market, there is less to stimulate home prices. "Competitive failure" may be overblown wording to describe the present situation, but Massachusetts desperately needs to find a way to return to the slow-to-moderate population and jobs growth rates experienced in the 1980s and 1990s. Home prices in Boston relative to the other leading U.S. cities (Sacramento excluded) will continue to lose ground until jobs growth returns.

Population exodus is right. Boston has to do a better job at marketing itself. And I don't mean some tourism bureau within the government. I mean the citizens here need to do a better job speaking well about the treasures within New England and start enjoying this as a place to live. I've found that pride in San Diego, Seattle and San Francisco. Come on Boston! Spread the joy!

Real estate prices puffed up more in California than most of the rest of country because borrowers there were much more likely to use exotic mortgages (interest-only, option-ARMs, etc.). This gave borrowers more money to buy houses with, hence the larger price jump.

It should be no surprise now that as this loans are going south, cities like San Diego and Sacramento lead the country in house price drops.

I think if you check the statistics, you'll see that folks in Boston stayed away from interest only loans.

Business Week did a survey in 2005 of the percentage of mortgages by city which were interest-only. Here in Boston, we were real slackers with only 17%. However, in California, most of the big cities were above 40%.

The more funny money floating around means higher house prices.

Something looks very strange about these statistics.... I've not heard anyone suggest that we're actually _below_ 2000 levels in 2007. Were these numbers weighted rather than absolute or something?

A lot of our housing stock is old and crappy. So you have old and crappy 50 year old homes competing with 10 year old or new homes that fill other metros. It is no comparision. Boston housing stinks. Perhaps it would be worth the cost if the houses are nicer. Unfortunatley, with the houses being so expensive, it makes it prohibitive to buy and update them. The best thing that can happen for our state is for the price of our homes to plummet. It will make our tech companies able to grow here and be globally competitive. It will also allow our residents to have extra money after the mortgage is paid to actually maintain and update the homes. Why do we all judge our economy to be failing is the cost of living is not excessive? That is backwards. A low cost of living, to me, creates the opportunity to invest and better compete, which creates a healthier economy.

Bnixon nailed it. Population growth in MA may be stagnant and may even be retracting. I personally relocated out of MA this past year. I asked the movers during packing day if business was good and he stated that in his 20 years in the business he's never been as busy as the past couple of years. I asked what he thought the ratio was of folks moving out of state vs. in, he guessed 3 to 1 moving out. That's just anecdotal evidence with a very limited sample size but is food for thought.

One thing that may be affecting and will affect the Boston area more in the future is universities and colleges building more residential halls for graduate students. Areas around universities enjoy/are cursed by students here for a limited period of time of intensive study, and so they will pay for the convenience of living close to their school, and of course this drives us housing prices for everyone. Think of how much easier it is to find parking in the summer and you'll see how much our economy is affected by schools and what they do.

Suds, i think the population exodus theory is totally overblown. If we were losing so many people, housing prices would be much much lower. And there would job losses, rather than growth. Granted, job growth isn't stellar over the last several years, but it is there. I may be wrong, but i just don't see it.

I think Richard is correct, in many of those other cities, the "NINJA" loans (no income, no job, no assets) were more prevalent than here, which would artificially drive up their home prices. It's always seemed to me like people in this part of the country were more financially conservative.

I think the answer is obvious:

Seattle: Better coffee. Prettier countryside
San Diego: Better weather.

I've never been to the west coast, but from the maps I've viewed they actually lay their streets out on a grid, rather than just paving wherever the cows stumbled.

Not to mention the distinct lack of Ted Kennedy. That alone should bump house prices a good 10%.

Yes, I am being facetious. Sort of. A little.

Housing in Boston is really bad. Who really wants to live in houses that are over hundred years...and why would I bother renovating them? Housing in other cities are so much more beautiful than in Boston.

On the other side, the only condos that I actually want to live in Boston are at least 2 million dollars. Wealthier people would pay up to live in that kind of housing. That's why the luxury market is still hot while rest of Boston sinks lower and lower.

I definitely would not invest in housing in Boston. Why bother purchase units that are so old and update them? They would never be like modern buildings with all the amenities included in them.

You're assuming that our bubble has burst. It's still bursting, so I wouldn't say that we've escaped yet.

"If I had this money, I would rather buy in CA."
I can't help saying this to myself everytime I look at some MLS listings.

Because Boston is more expensive to live with bitter long winter, crappy roads, missing street signs, crazy intersections, plus mean drivers....

Yes, I can't wait to get out of here, and I am not the only one who feels this way.

I lived in Seattle for many years. Its like living in a beautiful picture postcard that you can see all around you...but its so hard to get to. The traffic is worse than here. The inner city virtually has no parks and no waterfront access. The architecture has no charachter whatsoever. Being surrounded by beauty has its perks...but there is a reality to it.

Amy wrote:

Because Boston is more expensive to live with bitter long winter, crappy roads, missing street signs, crazy intersections, plus mean drivers....

I recently had a conversation with a woman who grew up here. Apparently, only chumps and transplants think the street signs in Massachusetts are of any use whatsoever.

If you're looking for directions, don't listen to anyone who tells you street names. Listen only to the people who tell you how many dunkin donuts to drive past before turning.

Re: #9: "Suds, i think the population exodus theory is totally overblown. If we were losing so many people, housing prices would be much much lower. And there would job losses, rather than growth. Granted, job growth isn't stellar over the last several years, but it is there. I may be wrong, but i just don't see it."

I don't know, Brian. I know a lot of people who've been moved/seen their job moved out of state. I'll bet you some of the reason housing prices are not lower, as you pointed out, is that people moving out don't want to sell at a loss- they bought way too high a few years ago. They're all dragging their heels.

This interactive visualization from NYTimes shows Boston peaking early (2001), then cooling off. Maybe due to stock market/dotcom bust?

It's a fascinating tool-