Homes in the Boston area cost more than homes in most other places. The difference between median prices here and elsewhere is basically a "Boston Premium," an additional amount that people are willing to pay for homes near the Hub Of The Universe.

Something interesting happened to the Boston Premium during the housing boom: It got smaller. Boston housing became relatively more affordable.

The chart at right shows the ratio of the annual single-family median home prices in metropolitan Boston to median prices for the nation as a whole. In 2001, the Boston-area median home price of $331,900 was 2.12 times the national median home price of $156,600. By 2005, even as the local median peaked at $413,200, the Boston Premium had dropped to 1.89 times the national median. The data is courtesy of the National Association of Realtors.

This phenomenon highlights a great truth about the late housing boom: It disproportionately lifted the prices of the least expensive homes, because the availability of easy-money loans disproportionately increased the buying power of lower-income families.

This was true within cities: In Boston, the boom lifted Dorchester more than Back Bay. It was true within regions: In eastern Massachusetts, the boom lifted Lawrence and Brockton more than Newton and Brookline. And it was true for the nation: Prices rose most quickly in Nevada and Arizona and inland California and other historically cheap housing markets.

It is worth noting, of course, that the long-term trend remains strongly upward. Before the Massachusetts Miracle, local housing costs tracked the nation fairly closely. Now, despite a six-year decline in the Boston Premium, the local median still is almost twice as high as the national median.

But the compression still is noteworthy because it may suggest something about the future of relative home prices in a nation whose wealth and companies are increasingly distributed more evenly across the vast American landscape.

Credit: The idea of a Boston Premium is completely inspired by the "Orange Premium," brainchild of the Orange County Register's Jon Lansner.

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