Massachusetts Housing Market

Assessmentprepared for the

Massachusetts Department of Housing and Community Development by

UMass Donahue Institute Director, Michael D. Goodman

Presented by:Tina Brooks

Undersecretary for Housing and Community DevelopmentNovember 2008

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MA Housing Market Assessment

1st Statewide housing study in over 20 years Uses MOBD & RPA regions Organization

Population trends Employment trends Housing Supply & Demand Housing Affordability Housing Safety Net

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Regions

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Context

Conducted during a period of significant volatility National economic recession Declining housing market Increasing energy costs Decreasing consumer confidence

Ultimate impact??

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Cape and Islands Region Profile 2000-2006, Population Gain of 1.0%

Nantucket (8.9%) and the Vineyard (12.6% for Chilmark, 6.6% for West Tisbury) grew substantially.

The Upper Cape experienced the greatest growth on the mainland, with Mashpee growing 10.1%, while the Mid-Cape experienced the greatest loss, with Yarmouth and Dennis both losing 2.4% of their population.

79% Homeownership Rate, substantially higher than MA average

3.3% Regional Employment Share Behind all regions except the Berkshires. 4.4% employment gain from 2001-2007

The region is projected to have housing supply surpluses at least through 2012, but there is a projected shortage of multi-family units.

14% Home Price decline Sept. 2005-May 2008, slightly larger than the state average.

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Population 2000-2007

1.3% growth statewide Declines in youth/pivotal for housing demand Increases among 50-64s

Household growth flat Increase in 1 & 2 person households Decrease in 3+ person households Little change across age groups other than

aging boomers

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Employment More than 50% of state’s covered employment is in Greater

Boston 41% of employed workforce live there Commuting a necessity, not a choice

Top Employment Centers & covered employment share NE (Lowell, Andover) 12.8% SE (Brockton, New Bedford, Fall River) 12.7% Central (Worcester) 9.8% Pioneer Valley (Springfield) 8.9% Cape & Berkshire 5.3%

1.5% decline statewide 2001-2007(50,000 jobs) Only SE, Cape and Central added jobs

SE grew 11,295 jobs (2.9%) Cape grew 4,400 jobs (4.4%) Central grew 1070 jobs (.3%)

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Regional Incomes Continued widening in regional income disparity since 1979 Eastern MA becoming a super region (more expensive) Gateway Cities still job centers for the Commonwealth – challenge

and opportunity Regional Household Median Incomes, 2006

First quintile Second quintile Third quintile Fourth quintile Fifth quintile

Berkshire $9,930 $25,323 $47,513 $73,552 $117,158

Cape& Islands $14,710 $34,533 $54,639 $81,443 $140,671

Central $12,493 $33,624 $56,065 $84,795 $136,608

Greater Boston $11,680 $36,564 $63,045 $99,536 $178,627

Northeast $13,450 $39,088 $66,019 $101,502 $164,547

Pioneer Valley $10,402 $26,722 $46,721 $72,117 $116,803

Southeast $12,391 $33,517 $57,284 $85,531 $137,116

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EOHED Responses

Lower environmental barriers investment Development “readiness”: expedited permitting, zoning

reform, Growth Districts, Community Assistance Unit Broadband

Elevate sectors with best prospects for living wage (and better job growth) Life Sciences, Clean Energy, Creative Economy, IT and

specialized Manufacturing Assure housing support for employer location decisions

Employer-Assisted Housing (EAH), preferred mortgage products, Preservation

Expand support to regional economies outside Greater Boston region Gateway Plus

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Community Development Physical Development

Encourage communities to approach projects in a strategic manner to deliver benefits to the overall community

Encourage Smart Growth and Sustainable Development principles

Economic Development Help communities make informed decisions about a project’s

short & long term consequences Help communities initiate and generate their own solutions to

local development problems

Social Development Shift from traditional approach of serving families/individuals in

poverty to an asset building strategy that breaks the cycle of poverty

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Asset DevelopmentBefore Workforce Development Access to Benefits Financial Literacy

IncomeWage 19,008$ 25,344$ 25,344$ 25,344$ Child Support 2,436$ 2,436$ 2,436$ 2,436$ Interest Income from Savings -$ -$ -$ 23$ Total Income 21,444$ 27,780$ 27,780$ 27,803$ ExpensesHousing/Utilities 8,808$ 8,808$ 7,603$ 7,603$ Child Care 8,988$ 8,988$ 5,842$ 5,842$ Food 4,752$ 4,752$ 4,752$ 4,752$ Transportation 3,444$ 3,444$ 3,444$ 3,444$ Health Care 3,108$ 3,108$ 1,942$ 1,942$ Miscellaneous 2,880$ 2,880$ 2,880$ 2,880$ Total Household Expenses 31,980$ 31,980$ 26,463$ 26,463$ Check-cashing 380$ 507$ 507$ 60$ Furniture Finance Charges 1,809$ 1,809$ 1,809$ 70$ Emergency Loans (Payday) 596$ 596$ 596$ 85$ Total Finance Charges 2,785$ 2,912$ 2,912$ 215$ Earned Income Tax Credit (518)$ (518)$ Child Care Tax Credit (960)$ (960)$ Child Tax Credit (2,000)$ (2,000)$ Total Expenses 34,765$ 34,892$ 25,897$ 23,200$ Net Income (13,321)$ (7,112)$ 1,883$ 4,603$

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Housing Thru early 80’s MA mirrored the nation

Highest national rate of home appreciation since that time

Since 2005 only 9 other states exceeded MA - led by FL, CA and NV

Northeast and Southeast regions were first to recover from early ’90s recession after Boston

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Rental Housing – Priority Need for Young Workers 54% of MA tenants live in 1-4 family properties

Half of the rest in subsidized housing (including public housing)

State produced 75% of the 200,000 units needed between 1990-2000 Lack of production resulted in 70% rent increase ’94-01

Dramatic rent increases in eastern MA ’94-01 Increasing renter households where jobs are Loss of units to condo conversions Shortfalls in production since 1990

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Response to Production Production increase during 2004 and 2005

New growth and prior shortfall = 104,000 units needed between 2000-2006. Net gain was 87,000.

Production focus Mod priced condos Age-restricted housing High-end rentals

Many Condos hit market as rentals & added to supply in 2006

Market result Vacancy 5-6%; 2-3% annual rent increases

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2006 Massachusetts Market High Rent Market

4th Highest Statewide Median Rent in 2006 @ $933/mo. Only CA,NJ,& MD higher National median was $763

Low Barriers to Homeownership Low Interest Rates Flexible underwriting New/subprime mortgage products

Buyers subsequently hurt: Sale price decline 12.2% (Sept ’05 peak and May ’08) All property types affected: single family, Condo, 2-4 unit

multi-family No Massachusetts glut of unsold inventory compared to US

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Housing Affordability Between 2000 and 2005/6

MA household incomes stagnant Housing prices rose significantly Recent price declines offset by rising utility costs and property taxes

Statewide Household Median Income (in 2006 $)

First quintile

Second quintile

Third quintile

Fourth quintile

Fifth quintile

1979 $13,487 $33,374 $53,977 $76,546 $120,450

1989 $13,824 $38,467 $62,869 $91,075 $145,278

1999 $15,085 $38,409 $63,634 $96,212 $165,043

2006 $12,188 $34,464 $58,909 $91,319 $154,890Source: US Bureau of the

Census, PUMS

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Looking Forward… Produce housing in anticipation of job growth Support local advance preplanning work – Housing Production Plans, permits, zoning changes Match housing production to housing needs – Production Plan Asset Development Commission targeting self-sufficiency