‘People Don’t Want To Be A Homeowner’ In Boston
The Boston Globe reports on the latest Census figures. “Boston lost 30,107 residents in the first half of this decade, a precipitous drop that ranked the city among the biggest population losers of any major municipality in the country, according to US Census Bureau estimates to be released today.”
“In May, a Globe survey of 524 people who left Massachusetts last year showed the top reasons people gave for moving was a better job, followed by the cost of housing. Economists said that the high cost of housing in Boston, compared with other US regions, is one of the main reasons people are leaving the city for more affordable housing outside the state.”
And the Globe looks at the rental market. “Rents are rising around Boston for the first time in five years. The average monthly rent in Greater Boston climbed to $1,355 this spring, up 3.6 percent from a year earlier, according to a survey. The rental rate is now the highest it’s been since 2001 and halts four years of declines. The national market also peaked in 2001 but has started to rise again recently, too.”
“Surging mortgage rates, high home prices, and a belief that prices may tumble are driving more people to give up on or postpone buying a home and to rent instead.”
“Kevin Mulrenin, a police officer in Amesbury who once built his own house and later sold it for a profit, considered buying a house or condo but said he couldn’t ‘get over the fact I felt I was being completely ripped off by the building industry.’ So he rented a one-bedroom apartment in Amesbury.”
“He currently pays $750, his half of the rent for a two-bedroom Colonial he shares. While he doesn’t think house prices will crash, he said renting is his best move, because prices will fall and provide a better buying opportunity later.”
“New luxury apartments with steep rents are rapidly coming on line. As luxury apartments are leased in the suburban market, they pull up average rents. In the past year, 8,730 apartments were taken by renters in Greater Boston, compared with just 1,578 the prior year, and about $20 billion in apartment projects are under construction, said Tom Meagher, president of Northeast Apartment Advisors.”
“‘In the face of tepid job growth and a condominium market that hasn’t died,’ he said, ‘the fact the rental market has done this well is remarkable.’”
“Buying property ‘is less attractive than it was a year ago,’ said Meagher. In a housing boom, he said, people ‘make sure they don’t miss the train when rising prices might freeze them out of the market. It works in reverse if prices are in decline. People don’t want to be a homeowner.’”
A related link:
‘The housing bubble has helped push rental prices higher,” says Christopher Lobello, regional manager at the Las Vegas office of Marcus & Millichap, an investment property firm. ‘As the boom wore on and prices became less affordable, that made renting look more attractive and that created more demand..Lobello also says that a glut of condo conversions has boosted annual rents by taking supply off the market.’
Aren’t there over 40k condos in the pipeline in Boston? And after falling for years, a 3+% increase in rents is ‘much higher’?
Rents were “predicted to rise” here in PHX, but I haven’t noticed it. My lease is up at the end of this month—if I sign up for another year I keep the same rent, and if I sign for six months it only goes up $40 (and the other night I found a nice house I can rent for LESS money than I’m paying for the apartment). Seems a better deal than throwing a $50K down payment at some overpriced house only to watch it evaporate in the next couple of years.
One glance at the Republics for-sale classifieds and anyone can see the crunch is coming in PHX. Don’t even need to look at the for-rent.
Ben,
“Republics for sale”?
“The Arizona Republic”, the petroleum oils smeared on dead trees old fashioned way some people used to use to diseminate information in between large doses of shameless opinion and advertisements.
Talon
I am still planning on a Phoenix bubble party on July 9th. Hope you can still make it.
Count me in.
I suspect average rents may have increased in part because people are renting condos/houses cheaply but at higher prices than an average apartment. Lots of private residences for rent here in Vancouver.
betamax,
Vancouver USA or BC?
I’m pretty sure Betamax is in BC, not WA.
yes, BC not WA. Neighbors but not next-door.
Can someone name one good reason why they would pick Boston to even consider living in? I don’t get why everyone doesn’t leave that rathole. Leave it to Useless Ted and FlipFlop Johnnie.
Maybe so they don’t have to live next to an ignoramous like you.
This from someone who doesn’t even know how to spell “wiener”, Bwahaha!
Hey dogmeatwienerwurst where did you go to school, Vienna?
Signed, Frank Furter
Sorry Ben, old habits die hard.
I could give you several, but you probably wouldn’t believe me. At the very least, it will seem eminently livable after 6.5 years in NYC. :-/ Also, some of us grew up in and/or have family in “that rathole.”
All of this locality-bashing is more than a little tedious. One of the great things about this country of ours is the variety of climates and cultures that we have to choose from in deciding where to park our keisters. Just because a particular area doesn’t suit you that doesn’t make it bad for everybody.
While I luv Virginia where I grew up and live, I think beantown is great. I travel a lot for work. The nicest people I’ve ever met were Bostonians. Think it might be the legacy of small village life.
Dude, Bostonians don’t call Boston beantown unless they’re subtlely poking fun of it.
Boston is only Boston or perhaps the Little Apple for those with Manhattan envy.
Take the tired political comments over to some conservative site if you insist. Don’t do it here.
“Can someone name one good reason why they would pick Boston to even consider living in?”
Toscaninni’s Ice Cream.
The good thing is that Toscanini’s has driven run of the mill places like Steve’s out.
Now, it’s the battle of JP Licks, Toscanini’s, Ben & Jerry, and local places and personally, I like ‘em all with a bias on Toscanini.
Please stop bashing Boston - this is a wonderful city to live, not too big, but vibrant and beautiful, full of things to see and places to go. I prefer it to the monstrously big, unsuitable for human habitat New York, Phildelphia and Washington, which are eeringly empty and scary at night , and Los Angeles, in whose streets I encountered more weirdos than in any other metropolis I’ve ever been to (including NY), and I have been to quite a few, on 3 continents. And not to sound too OT - as much as RE here is overvalued, and it is, Boston is still more affordable than CA.
meh, it’s a city, don’t take it so personal.
Boston is great. …this from a lifelong New Yorker.
Robert Cote’
I realize you haven’t posted on this topic yet but you must admit the timing of Ben selecting this article from a rather sumptuous buffet of offerings is downright weird! We were just discussing “flow of funds” and you gave us a glimpse of what CA may look like in a few years by drawing a parallel to MASS! Too weird.
MA has one advantage that I’m not sure other states do. 50% of your rent is tax deductible if it’s your primary residence.
Eschewing the obvious retort of “great minds think alike” what’s happening is a winnowing of all possible futures to a scenario of several possible futures in the same general direction. The only people left speaking authoratatively on the subject are those who have been right so far and willing to keep predicting. The rise to the sky people were washed out, the soft landing people are washing out, the isolated pockets people are starting to crumble and all but a very, very few are surprised at the speed with which things are unfolding/unraveling.
I’m also wired in. I grew up in MA and my little sister is renting a mansion in Boston as we speak and my mom is in FL, another sis in Australia and I am in VenCo. I also bought my first rental property before my first home while living under rent control in Santa Monica. I suspect I’ve seen it all so none of this surprises me.
Robert, that is my one regret. While I was under rent control in WeHo, I just could never swing a ppty out there - even for a rental. Good for you. THAT must have paid off nicely.
Sold in April for 273x rent. Freakin’ CA treats 22 yrs of capital gains as regular income. Freakin’ San Bernardino has what is in effect an illegal sales tax on home sales. Still, it was insane to let that much money sit illiquid in one economic sector.
That’s too bad–captial gains should be taxed at a higher rate than income you actually have to work for.
Moopheus . Your attempt to inflame is summarilly dismissed as unimportant. You should know better than to wave a knife at a gun show trying to pick a fight.
Whatever, no knife, just me and my mubtakkar of goofiness. Are you so important? You have made some obscene profit and still find a way to whine about it? I am less than impressed.
Obscene? Profit? Whatever are you talking about? The stuff was every bit the same color and denomination as all my other money and I wager you’d be unable to tell the difference twixt it and your money given the opportunity. There were no guns involved in the transaction at least. The only guns were the bullies outside who saw the exchange and said that since I no longer owned the property I’d better pay up or else. Interestingly they went to the new owner and said since you own something now you better pay up or else. The nice people at the FTB (no, not Ferengi Taxation Brotherhood) are clever, they even managed to charge me sales tax on the Federal excise taxes I paid for the gas to go over and close the deal. Yep, taxes on taxes. Welcome to Kalifornia.
Paying taxes can be galling, especially when, as is often the case in CA, it’s difficult to see how all that money is being spent to the benefit of the taxpayer. However, there is an argument to be made that taxing earned income at a higher rate than capital gains is a disincentive to good old-fashioned hard work. It’s possible that the tax advantage enjoyed by capital gains may have been a contributing factor in the housing bubble, making earning income by the sweat of one’s brow look like a sucker’s game.
I’m still trying to decide whether Moopheus deserves to be sent to bed without any dessert for being unnecessarily antagonistic or given a great big smooch for getting a rise out of you, Robert.
Ohh, Ms. T. you got me all wrong missum. He dun git no rize outta me. I be the proverbial Aging Ice Prince. Ah kin warm mah skin a bit and let the attacks slide off or I kin harden mah heart and let ‘em bounce off.
Because I live on the edge of known civilization mah critters an me got fleas. Dun try tuh kill all de fleas, jus try tuh keep ‘em frum bitin’ me and mine.
Paying taxes is a proud and honorable act. I stand tall and pay my due. I pay more than my due because the nice men with the big not shiny guns suggest it. A tax on capital gains is a disincentive to investment. There is no seperation of the two. Look at the last say 4 millenia, which resulted in better outcomes?
Paying taxes is proud and honorable? A few minutes ago you were whining about it. You say that I couldn’t tell the difference between your money and mine, but you also insist that the tax man should be able to. Income is income; why should it matter where it came from? Very few people would turn down the opportunity to make more money because of taxes; this ‘disincentive’ is baloney. There clearly hasn’t been ENOUGH disincentive for “capital investent” in real estate in the past few years.
Moopy, what about turning a quarter mil in realnestate into a quarter mil in cash is a taxable action? Careful, think before replying.
Henry George talked often about the difference between “income” from production and from rents from land.
It is my understanding that he believed in a single “Land Value Tax”(LVT) to replace taxes on earned income from labor.
“George made the argument that nearly all of the wealth created by social and technological advances in a free market economy is captured by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the root cause of poverty”
Late to the party, as usual, but in Robert C’s defense, if property is held for such a long term (22 years, IIRC), the cap gains should be adjusted for inflation. Of course, it would be an absolute nightmare trying to calculate for taxes. As it is, it’s treated like current income, and that isn’t really correct.
That being said, I agree with Moopheus and Ms. T. in that cap gains should be taxed at rates HIGHER than ordinary income, IMHO. Is productivity less important than investment?
I’m saying this as someone whose income is 100% cap gains (I trade). Even I can see the unfairness as my income is taxed at a lower rate than my husband’s (who has to actually **work** for his money). Just another example of the “rich” making up the rules, IMO.
clarification: my income is treated as ordinary income on short-term gains, as you probably know already.
Sorry, the biggest newspaper in the state; the Arizona Republics’ homes for sale, in the classifieds.
San Diego is losing population also, there was a mass exodus of people leaving last year compared to moving into San Diego.
San Diego officially today fell to #8 in highest population to San Antonio, losing its #7 ranking.
So we get reports of record over building (and more on the way, god bless those builders) and more people leaving the area, ARMs reseting in 2007, 2008 should be a great time to buy on the cheap in SD.
That rent increase sounds pretty good compared to what we’ve been experiencing here in NYC, where the rents have continued to go up steadily every year, though the pace slowed a tad after 9/11 when the economy was limping and those with limited intestinal fortitude were leaving the area. They seem to be going up a lot recently (ours went up 23% this spring, to the outside limit of what we would pay rather than moving.) I know what they keep telling us about fuel costs and property taxes going up, but I suspect that in addition the landlords have decided they’re going to get their piece of the red-hot market before it flames out. We may be hearing more bearish language in the media, but it seems like there’s still a lot of bubble-denial on the ground.
I want to add “Land Value Tax”(LVT) has several advantages over earned income tax. here is a quote:
If we tax labour, buildings or machinery and plant, we discourage people from constructive and beneficial activities and penalise enterprise and efficiency. The reverse is the case with a tax on land values, which is payable regardless of whether or how well the land is actually used. It is a payment, based on current market value, for the exclusive occupation of a piece of land. In the longer term, this fundamentally new and different approach to revenue raising will stimulate new business and new employment, reducing the need for costly government welfare.
I welcome feedback or comments on this.
I think this is pretty far off the topic of Boston rentals (I know, my spousal unit dragged it in that direction) but if Ben doesn’t think it’s too philosophical or esoteric it might make a good topic on its own for the weekend. That might get you the sort of discussion you’re looking for.
I’ve spoken with several RE people here in Boston recently… all say things are going down, down, down.
Rental market in Boston is always robust, due to the hordes of undergrads and grad students and post-docs needing a place to live each year. And now that would-be condo owners want to rent instead, no wonder rents are rising. Fair enough; I’ve been telling everyone for a few years that renting was the way to go, and now it seems more people are seeing it the same way.
There was an article in the Washington Post yesterday or the day before about Student Loan rates going up and that the effect that we’re seeing on housing will hit college students too. There was some student with $110,000 in loans who was going to add $45K this year. Seems to me to be about as insane as buying housing now. There was some mention about taking student loans for 30 years too.
I spoke with a former college professor that I work with now and he’s thinking that more and more people will figure out that the returns on a college education are diminishing with respect to the amount that you have to pay for it and the time lost in the workplace. With the conclusion that a lot of smaller colleges are going to be closing up shop or merging in the future.
It’s about time that people are discovering that getting a college degree is just a waste of money. Twenty years ago it was relatively cheap to go to state school and waste four years getting a communications degree just to wave your piece of paper at propspective employers. I knew many 8 year seniors back in the eighties when all you had to do was scrounge up $1000 a quarter. Now you are looking at $20,000 a year to go to a UC for your first year for tuition, books, room and board! Crazy! I don’t have any kids yet, but if they want to go to college 20 years from now they better have a damn good reason why they want to go!
Because the will be working at Wal-Mart otherwise ?
If I had to do it over again I’d proably choose a trade that can’t be outsourced easily, plumbing, HVAC, Dental, heath care, mechanic, etc.
I agree with you there. I’m happy that a former employer paid for my 2 degrees. Have had last 2 jobs sent offshore and I doubt I’ll be using the degrees any more. I’m wishing I was a plumber or something these days.
The last plumber I had show up from Roto Rooter didn’t speak a lick of English. I had to resort to pantomime to try to explain the problem and find out what he’d bid for a water heater replacement. Once he finally got it, he wrote down a number. That was it - a number - nothing broken out for parts, labor, no description of what the bid included or excluded. I shook my head “no, no”, led him out of my house, then called a local independent guy.
Give me a union tradesman any day.
A college degree is usually not a waste of money. If you study engineering, science, finance, or a health field you will probably do well. But there are of course many fields where it’s not going to pay-off. $40k a year to study literature? Nothing wrong with the field, but the cost is totally out of proportion to the returns (much like housing). I’ve often thought that we’re going through a higher education bubble.
The university has been institutionalized for centuries, but the modern university, (primarily state run), is no better than a diploma mill. I would much rather hire a talented autodidact than most of the products, oops I mean graduates, that are spewed from the education factory. Granted many individuals are extremely bright and do well in spite of that system, but at the same time they would have excelled outside of it as well if they had any bit of ambition and drive. I can’t believe that education is considered an industry in this brave new world as well!
These pieces of paper called diplomas that kids tout on their resumes mean less and less to me everyday.
Mine is in a drawer somewhere.
Ya wanna talk about high pressure mineral physics?
No?
Me neither…orthoclase bores me too.
statistically (i.e. averages which do not determine individual outcomes), uni grads make considerably more money than non-grads - a couple hundred grand more per lifetime. Plus, they tend to get white collar jobs with less health problems.
that said, a degree is wasted on many…they’d be better off learning a trade or just going straight to retail sales.
Science and engineering have been hit hardest by globalization.
Think about it, in the past, MA tech employers like DEC, Prime, Polaroid, Teradyne, Wang, and Gillette used to employ a total of near 1/2 million people. Today, lean firms like Boston Scientific, Genzyme, EMC have at most a total of 50K headcount. We’re talking about a rapidly declining marketplace for S&Es.
The most marketable degrees are in pharmacy and healthcare delivery but that’s not really anything new.
Finance is also taking a bloodbath these days and really, there’s nothing so special about studying economics anyways. London School of Economics has a
distance program for
less than $10K USD and this is the Wharton school for Europe.
http://www.lse.ac.uk/collections/LSEExternalStudy/Programmes/UGDegrees.htm
Actually it’s more like $5K USD for undergrad.
Rising rents also reflect creeping inflation, though the article does not mention this.
The argument is that average rents are rising because the inccreased supply is at the luxury end. Given the ridiculous allowances that a lot of BU students have, it is not surprising that a flood of luxury units may be fully rented.
Still, the non-luxury component has got to start softening, unless the rate of foreclosures goes up a lot.
Here is the link for all cities (I hate how these articles only mention a few of the stats)
http://www.census.gov/popest/estimates.php
Of note, for San Jose, CA, the population from 2000 to 2005 increased by 17,053 people (net). However, San Jose issued 23,963 building permits since September 2002 (reference). So, to anyone’s eye, unless we were severely deprived of real estate before (we weren’t — I’ve lived here since 1999, and since 2000 I’ve had my choice of rental housing at quite reasonable prices for a large city.)
Do the math for your city — I am sure there are many out there worse than San Jose. (San Diego, anyone?)
Most of the cities losing pop are not a surprise (rust belt). But Gainsville, Savannah, Augusta and Richmond are a little surprising. I’ve never seen articles of bad economies there, and have heard for years the sun belt is gaining pop.
Also interesting to see that most cities in the OC have barely gained any pop in 5 years. As in, less than 1 percent! Where is the “flesh and bone” demand to drive up home prices to 2x what they were in Y2000??
Just more proof that people were paying more for no reason other than… they were willing to.
This just doesn’t make sense. If people are leaving Boston then demand for housing, both rental and owned, must be going down. There is some important facts missing from this article.
You need to separate sources of demand: from speculators and from people who actually want to live in the area. In this housing bubble the two have little correlation.
Just anecdotally, many of my single friends have bought their own places over the last three years. We also have the highest rate of never married adults of anywhere i nthe country. So, if average household size is declining demand may stay strong despite inflation.
Of course it gets interesting when people get married or, as is more common “move in together” and have to sell one of their condos, or carry two mortgages.