It's still expensive to buy here

Can't wait for all the posts explaining "everyone wants to live here," "it's different here," "they aren't making any more land in Massachusetts," "biotech is doing great!" and the like.

Maybe you could require each person making those arguments to explain first why the price-to-income and price-to-rent ratios shot up only after 2000. It could be a required field in the comment box, or something.

When we were in a market for a home in 2002, we took one look at Boston's prices and headed south. We bought a home in Cumberland, RI--on the border of Massachusetts (in fact our house is three blocks from the Mass line). We bought a 4-bedroom 2-bath Cape in a nice neighborhood for $180,000.

Now, 6 years later, homes are still affordable. There are three homes on our street for sale. They range from new construction (3 bed, 2 bath for $279,000) to a renovated cape (4 bed, 2 bath for $255,000) to a fixer-upper (3 bed 1.5 bath) for $220,000.

We're five minutes away from a train station (South Attleboro) and enjoy three job markets (Worcester, Providence and Boston). My husband works in Canton, which is 35- minute commute. I work in Foxborough, with a 15-minute commute.

Go south! Way way way way more for your money.

Its a laughably silly list, as most of those things are, if its the one I'm thinking of (the link doesn't work). Fremont and Oakland, but no Los Altos Hills or Walnut Creek? Hillsborough?

Does anybody have data regarding:

1. median home price in the Boston area;
2. median family income in the Boston area;
3. median rent in the Boston area.

Also the same data for the entire Commonwealth of Massachusetts would be good.

I am just trying to figure out what exactly will support the current level of prices if the 90-100% leverage is eliminated.

To Response #2 -
You realize if you had bought a Cape in say Hudson, Ma or similar town instead of going to RI you would be stiing on a 500k home right now don't you?

To Response #1-
It's not complicated - homes are worth what someone is willing to pay for them - if they are worth more here than it MUST be because people want to live in them. How else would you explain it? Is it Bush's fault too?

I think that the index may be a bit skewed given the 'sample' house that they provided. A lot of the housing stock in the NE is older and smaller, meaning that anything that is 2200 SQ FT is going to be new construction and to justify the cost of the land the builder will have put top of the line finishes etc. Not that it isn't very expensive to live in this area. There however must be demand for housing in the area because prices are not in free-fall and houses that are priced 'reasonably' in today's market are still selling. Strangely enough houses in certain expensive towns with strong school systems are still selling decently without huge discounts.

The big difference with the Massachusetts market, compared to all of these "cheaper" places, is that the housing stock here is SO much older.

If you look at what is considered an "average" home in other parts of the US, it's usually one of those 5 bedroom brick monstrosities, in a named development cul de sac community, with the three car garage the main architectural detail in the front, the giant palladium window in the cathedral-ceiling front hall, and the big open kitchen/great room. Those generally tend to go for the mid 300's to mid 500's range. In the Boston area, those newer homes just don't exist in the same numbers that they do in Texas, etc. However, if someone is OK with a more modest home or a more traditional home, you can get a nice house here for the same mid $300's, if you don't insist on buying one in Newton, Brookline, Wellesley or Winchester. I know this because I live in a beautiful 1900-vintage 4 Square in Quincy that I bought for $350,000.

Alex,
Here's what I could dig up on the fly on your questions.

1) The median sale price in the Boston metropolitan area in July was $484,750, according to the Greater Boston Association of Realtors. That was down 8.2 percent.

For the state, the median single-family home sale price was $320,000 in July, according to Warren Group, which publishes Banker & Tradesman.

2) The median income level in Suffolk County and the Greater Boston area is $84,300, according to HUD.

3) The median rent figure is a little trickier to come by, but according to the most recent data on the state Health and Human Services website, the fair market rent for a 2-bedroom home in the Greater Boston area was $1,343. Mind you that figure is from 2003, so it has likely fluctuated a little.

There are other sources out there that may have more update figures, but I think this number will at least give you something to work with. If you wanted to get a general sense of the range of rents in a particular town, you could check www.rentometer.com and check the range of rents in the community you are interested in.

Good luck. Thanks for reading.

Megan,

Why do you write to go South? Do you have experience there? I own property in the Charlotte area and am considering a move.

Response to #5.

Being willing to buy a home and being able to are two different things. As #8 indicates (thank you) a median house price is about 5.75 times greater than median incomes in the Boston area. A lot of people were willing to buy, but the only way they were able to was by means of creative financing schemes, such as subprime, no downpayment and interest only financing. Perhaps I sound like a broken record (I also kept posting yesterday on the "downpayment" blog), but I again have to say that these kinds of things would be OK in a free market situation where the taxpayer is not called on to rectify the consequences of all this borrowing and the government does not interefere. However, that is not the case. Therefore, I support removing all kinds of crutches like reduced downpayments for the time being so the prices could return to something like 3-3.5 of incomes. Judging by many responsed on the "downpayment" blog not many people will be "willing" to buy here with a 20% down and a conventional 30-year loan.

I blame Tom Brady and manny ramirez.

Jerome,
500K for a cape in Hudson? I don't have that, but I can get you a good deal on this bridge that connects Manhattan and Brooklyn.

my wife and i are both 30ish, graduate school educated and each make more than the gb median family income on our own. i'm not saying this b/c we are extraordinary rather that we are not alone. amongst our peers, not colleagues but peers, the median income is roughly $120k. some make a little less b/c they've made decisions to put lifestyle over income. we're somewhat in the upper middle. people tend to connect w/ others on similar educational and earning levels. we know many couples that are some combo of doctor, lawyer, accountant, engineer, financial management, small to mid-size business owner, tech and biotech, etc. whether they remain 2 income families or not varies. take a quick peek around, there are a lot of people in eastern mass that make 6 figures plus individually. i also recognize that many have not been as fortunate as we have been and/or have chosen a different path in life. i do not mean to gloss over their perspective b/c they are no less important but they are not my competition in searching for a primary residence. an interesting but too time consuming project for me would be to stratify the economic data and break down the fundamentals for different levels of income as compared to percentage of the housing stock at different price points. i think john p has talked about the polarizing of wealth and it's effect on the local real estate market in the past but i don't know of anyone who has undertaken the task of actually unearthing and breaking down the data.

A lot of people are suggesting to move south. I have several friends who've done that in order to raise a family and afford a home, and 100% of them are trying to get back. But now they can't for two reasons primarily:

1. nobody wants to buy their 400k custom Mcmansion in Carrboro, NC when there is new construction for the same price popping up all around
2. even if they got 400k for it that won't buy you anything here, especially when you're moving back up with kids in tow and need more space than your previous 3,000 house down in NC.

Alex,

There will be very little to support home prices if low/no down payment loans are eliminated, and they already are being eliminated by many lenders. Low/no down payment (along with low interest rates, ARMs, no doc, etc.) loans are what helped fuel the bubble and allowed people with $30K incomes to buy $400K that they never had any hope of affording.

Once people need to come up with 10, 15, 20% down payments, home prices will collapse.....well prices are going to collapse regardless, the requirement for large down payments will just accelerate the collapse.

Requiring a down payment is in effect a contraction in credit as the buyer must finance a larger portion of the purchase while the lender finances a smaller portion.

And a contraction in credit is called deflation. Deflation in turn leads to lower prices.

Basic economics.

"There will be very little to support home prices if low/no down payment loans are eliminated, and they already are being eliminated by many lenders. Low/no down payment (along with low interest rates, ARMs, no doc, etc.) loans are what helped fuel the bubble and allowed people with $30K incomes to buy $400K that they never had any hope of affording."

Bobby, you make some interesting points, but I think you're missing the fact that even with the elimination of the low/no downpayment loans, the impact will only be felt in certain communities. Anyone who wants to live in a Belmont, Winchester, Newton, Wellesley - will still likely have a sizeable chunk of money to put down. I don't believe, as many do, that there will be a "trickle-up" impact on the entire housing market.

In cities and towns where first time homebuying is common, there is undoubtedly going to be an impact on home prices over and above what has happened with the recent market correction. But I think in the larger market, the impact will not be as great as some seem to be making it out to be.

I also think you're exaggerating a good bit when you talk about people with $30k incomes buying $400k homes. The banks had SOME lending standards - they were just really, REALLY lax.

JP, your ideas about market segmentation have not historically been accurate. Just as a rising tide lifts all boats, a sinking tide pull all boats down.

Hiking the downpayment and general credit tightening will affect all communities that have predominantly financed transactions. Belmont, Winchester, Newton and Wellesly all qualify.

"I also think you're exaggerating a good bit when you talk about people with $30k incomes buying $400k homes."

I went to look at a house listed for $310K. It had been bought previously for $340K. The place needed a lot of structural work as I recall. The owner was home during my showing - she was wearing a Dunkin' Donuts uniform shirt, and it was evident that she was also renting two rooms to boarders, and STILL needed to sell short. Don't tell me that Dunkin' Donuts pays enough to pay for a $340K house. I have looked at a lot of houses in neighborhoods where people are working at these low skill jobs and they are all selling in the low 300's and all need some serious work. That should tell you something about 2006 bank standards.

JP, right, and they are not making any more land. Of course, they are not making any more land in Japan and that country has been going through real estate price deflation for the last 15+ years.

I just read all the comments. Let me clarify: When I said "move south," I didn't mean the Carolinas. I meant Rhode Island. The northern border towns of Rhode Island are reasonable--quality housing, close proximity to Boston, great restaurants, an ocean and access to public transportation. We're thrilled with our decision to move here in 2002. There is no way we'd be doing as well financially if we had bought in Boston.

A number of people I work with have gone south over the last couple of years, primarily to Raleigh/Chapel Hill area or Atlanta/Decatur area. I've been looking around down there myself. Old housing stock still exists in those communities and while there are awful McMansions in the outer rings of these cities, the inner cities are actually quite pleasant with lots of trees and greenspace, the weather more temperate, and while housing is starting to get much more expensive in the inner cities, it is still affordable by most standards.