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The Boston Globe

Business

Home prices rebounding, but income stagnant

Home prices are increasing, new building permits are on the rise, and foreclosures have dropped, offering the strongest evidence yet of a sustained recovery in the Greater Boston housing market, according to report to be released Thursday.

In its most optimistic housing forecast in recent years, the nonprofit Boston Foundation predicts that housing and condominium sales will continue to improve through the end of this year, and that foreclosures will be down by 40 percent compared with 2012. But its Greater Boston Housing Report Card also warned the rapidly rising homes prices could outstrip incomes, creating an affordability crisis that is distancing working-class, moderate-income families from home ownership.

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“We think we’ve turned the corner,” said Barry Bluestone, the director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University and lead author of the study. But he added, “The economy is leaving housing affordability behind.”

The housing recovery in Boston and its surrounding communities is marching ahead despite the fact that the state’s unemployment rate has jumped nearly a percentage point since April, to 7.2 percent in July. The rising jobless rate would probably result in stagnating or declining household income, according to the report.

The conflicting trends reflect a recovery that is not benefiting everybody, said Michael Goodman, a public policy professor and economic analyst at the University of Massachusetts Dartmouth.

“The good news is that after seven plus long years of winter, the housing market is finally beginning to see the spring,” Goodman said. That should help many of the area’s homeowners, who are seeing the values of their properties rise and equity increase, he said.

But those and other benefits of the recovery remain uneven, Goodman said. Job growth is concentrated in the Boston area among industries such as financial services, information technology, and life sciences. But blue-collar and low-income workers continue to struggle, as do communities beyond the Boston metropolitan area.

“It’s reflective of the feast or famine recovery,” Goodman said.

Cities and towns can try to address the housing affordability problem, Bluestone said, by building more multifamily homes in cities such as Boston and Newton to help bring costs down, he said.

One trend that might help bring down the costs of housing for families is the development of smaller units of 450 square feet or less geared to young professionals in neighborhoods such as the South Boston Innovation District. That should free up more larger homes that several young people might now share for working families in neighborhoods such as Jamaica Plain and the Fenway, Bluestone said.

Despite the rising median home prices and bidding wars sparked by pent-up demand, there are few signs that the region is sitting on another housing bubble, the report said.

The slower recovery of wages, higher unemployment, and the increasing mortgage rates should keep the housing market from getting too feverish, Bluestone said.

“Today we have very, very different conditions,” he said.

Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.
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