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Study: Home buyers had it easier in '06

Email|Print|Single Page| Text size + By Kimberly Blanton
Globe Staff / October 11, 2007

The housing market in Eastern Massachusetts last year eased slightly for home buyers, who were able to find more properties they could afford, but tightened for apartment dwellers who faced higher rents, according to a study released yesterday.

Last year marked the beginning of a shift in real estate markets as home prices generally declined 3 percent from record levels in 2005 - more in many communities. This slightly improved a typical Boston area resident's ability to afford a home, though prices remained high, according to The Boston Foundation, one of the state's largest philanthropies, and the Citizens' Housing and Planning Association, a community development organization.

"Things have gotten modestly better in the past two years as prices have fallen, but it's still very, very expensive," said Bonnie Heudorfer, a planning consultant and coauthor of the study. It remains "a time of great angst and uncertainty" for buyers and renters, she said.

The study defined affordability as homeownership costs - mortgage, taxes, and insurance - that are no more than one third of the median household income for a given community, assuming buyers paid 20 percent of the purchase price at closing. The study covered Boston and 160 surrounding cities and towns in Eastern Massachusetts.

After hitting a low of 19 communities with affordable housing stock in 2005, the number bounced back to 30 last year and 46 in the first quarter of 2007, the study said.

But only six communities were within reach of first-time buyers, all in suburbs distant from downtown Boston: Bellingham, Blackstone, Bolton, Southborough, Stowe, and Townsend, Heudorfer said. While that's a small improvement from just one in 2006, 116 communities were affordable to first-time home buyers in 1998.

MassHousing, a state agency that provides mortgages to middle-income home buyers, said the average price these buyers paid for a home dropped to $219,000 this year, from $229,900 last year.

A soft market, said Peter Milewski, manager of business development for homeownership, means buyers "can make better decisions" and "they can make counteroffers. They don't have to offer the full asking price."

Tenants, meanwhile, saw an average 4.1 percent increase in rents in 2006, to $1,644 a month, while incomes grew just 1.4 percent - less than inflation. Community organizations said the housing market's decline is indirectly responsible, because as more people choose to rent, rather than buy, demand for apartments increases.

Rising foreclosures also hurt renters. In a speech yesterday, Eric Rosengren, president of the Federal Reserve Bank in Boston, said Fed research found that while multifamily units are 10 percent of the housing stock in Middlesex County, they account for 27 percent of foreclosures.

"This highlights a potentially serious problem for tenants, who may not have known that the owner might be in a precarious financial position," he said.

Tabitha Gaston, director of housing for Action for Boston Community Development, a services organization for low-income and working people, said the rental market has become extremely tight in recent months, forcing two families to "double up" in one apartment or move to far-out suburbs with lower rents.

"Landlords are in a very good position," she said, and "there aren't a lot of deals" for tenants.

Kimberly Blanton can be reached at blanton@globe.com.

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