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Prices up, paychecks down

Posted by Scott Van Voorhis October 3, 2013 09:42 AM

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Housing bulls, you've had a great run lately.

The Great Housing Market collapse that all those gloomy housing bears were growling about - in which prices in Greater Boston would fall another 30 to 50 percent - looks like a joke right now.

Boston area home prices are on a double-digit tear, driven in part by all our knowledge industry workers, who have fared well even as the slump has dragged on.

"Unemployment rates for the well-educated are strikingly low and income growth for these "knowledge workers" has been solid," notes the latest report from MassBenchmarks, an economic journal out out by the Donahue Institute at the University of Massachusetts Boston in collaboration with the Federal Reserve Bank of Boston.

So yes, housing bulls, prices are rising and sales just continue to go up. And, once again, owning a home in the Boston area once again looks once again like a profitable venture - provided you are thinking long-term.

But there are some reasons for concern as well. For starters, this housing recovery is being underwritten by the Fed, which is keeping interest rates at rock bottom lows with its cheap money policies.

That's amounts a massive subsidy for home buyers, who can afford to pay about a third more than they would in a more normal interest-rate environment.

And frankly, many buyers need all the help they can get, especially if they are not fortunate enough to work for some hot tech or biotech firm. 

In fact, most paychecks have shrunk significantly since the Great Recession and have yet to bounce back.

Despite a slight increase in 2012, median family income in Massachusetts remains 5.4 percent below what it was before the downturn, The Massachusetts Budget and Policy Center reports.

Nationally, that figure is even grimmer, with median family earnings down an even more substantial 8 percent.

And even here in Massachusetts, where the economy is faring better than in many other parts of the country, many workers, especially those just starting out, are still struggling. MassBenchmarks notes in its latest report.

If you are a young college grad stuck in a part-time job, you won't be buying a house or a condo anytime soon.

Here's MassBenchmarks again:

"Meanwhile, large segments of the state's population continue to experience economic distress. The average spell of unemployment is longer than in recent memory. Young labor force entrants are finding it very difficult to land a job, especially one that pays a living wage and takes full advantage of their qualifications. Many part-time workers would be working full time if the opportunity arose."

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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