Not so long ago, if you conceived a picture of new homeowners in Greater Boston, you may have thought of Eric and Anna Basile.
Eric, a software engineer, and Anna, a biotech worker, both earn six-figure salaries. They’re in their early 30s, prime home-buying age, and have spent the last few years bouncing among rental apartments, most recently a two-bedroom in Arlington that has begun to feel crowded.
They want dogs, and envision having children someday, and right now they have room for neither. And so last year, with a sizable nest egg saved up, they began to hunt for a house — preferably a four-bedroom within commuting range of Boston, for no more than $800,000.
They have had, as Eric puts it, bad luck “at every possible turn,” leaving them with little choice but to re-up their lease in Arlington for another full year.
“We want to move on with our lives,” said Anna. “We have the means that we think should be sufficient to make this work.”
But the Basiles — like countless other home buyers who are balking at a cooling housing market right now — cannot. And while that’s bad news for them, it may actually spell the latest blow in what has been a nightmare two years for renters: Apartments have never cost more and supply is near historic lows. Add more people trapped in their rentals, and it only gets harder for everyone to find — or afford — someplace to live.
“We’re already in a situation where we have so little supply that rents don’t really have any room to fall,” said Demetrios Salpoglou, chief executive of BostonPads, which tracks rental prices in Boston. “Then you add this additional demand from people priced out of the housing market. It’s not a promising picture.”
Indeed, the tumult in the housing market over the last year has pushed a good number of buyers, like the Basiles, to a breaking point. When they started looking in the spring, the pair were unable to compete with buyers willing to offer hundreds of thousands of dollars over asking price. And while bidding wars have faded, would-be home buyers are now finding fewer options as sellers pull back from a cooling market. The number of sales, already at its lowest level since the years following the 2007 housing crash, has fallen 14 percent so far this year, according to Greater Boston Association of Realtors data. And prices on single-family homes are up nearly 30 percent in three years.
Perhaps more than anything, mortgage interest rates, which have soared to their highest point since 2008, have put home buying out of reach for many. At 6.7 percent last week, the average monthly payment on a $600,000 30-year mortgage is nearly $1,350 higher than it was a year ago, when the average rate was just under 3 percent.
“The more rates go up, the more people will get cut out of the housing market,” said Andrew Justus, a housing policy analyst at the Niskanen Center, a think tank that studies urban policy. “In most cases, those people end up in a rental unit.”
That ratchets up the pressure on the rental market, which has already been sizzling.
After dipping in the early months of the pandemic, average rents in Greater Boston and other big metropolitan areas soared to record highs in 2021 as students and workers rushed back.
Those increases have eased, but costs are still sky high. The median rent for a two-bedroom apartment in Greater Boston — long one of the priciest rental markets in the country — was $2,096 in September, up about 7 percent from this time last year, according to rental site Apartment List, and 14 percent higher than September 2019.
What is perhaps more telling, though, is the vacancy rate: less than 1 percent, based on the apartments tracked by BostonPads. The number of available apartments is roughly 30 percent below pre-pandemic levels, and far lower than what’s considered a healthy market.
That puts a huge pinch on people like Katie Bell, a 31-year-old nurse practitioner at Boston Children’s Hospital. She has been surfing couches at friends’ places since she was priced out of her previous rental in Jamaica Plain at the beginning of September. She has hunted endlessly for a place big enough for her and her two dogs, but has hit nothing but dead ends.
Some places wouldn’t take dogs; others were far too pricey. And there were some that fit her budget, but just weren’t what Bell was looking for.
She finally found a three-bedroom in Medford last month that she’ll move into this week, but the hunt continues — now for roommates to take the other rooms.
“I’ve had to compromise on what I was looking for in a place, and I’ve been truly homeless in the process of trying to get something,” said Bell. “For someone in my position in life, it should not be this difficult to find housing.”
It likely won’t get better any time soon. Like many of Boston’s housing issues, the problem is rooted in supply. And while there has been a sizable amount of new housing built in recent years — 16,500 units in Greater Boston permitted in 2021, the most in 17 years — that increase in supply hasn’t put a dent in rents in a state with an estimated shortage of 100,000 homes.
There is one small consolation, according to Chris Lee, a senior housing economist at Apartment List: Rents probably won’t grow at the pace they did in 2021.
“There is a limit to how much rent growth is sustainable, because people at the bottom of the market just won’t be able to keep up,” said Lee. “At a certain point, people will start leaving.”
And until something swings in their favor, buyers who’ve gone to the sidelines lately are poised to stay there. Jim Burton, the owner of RE/MAX Destiny in Cambridge, said would-be home buyers he’s spoken to aren’t likely to enter the housing market again until mortgage rates subside.
“Most folks,” he said, “are sticking it out.”
For their part, the Basiles are still on the hunt. They’re not optimistic. Right now they’re finding fewer listings, some of which are lower quality than they were seeing earlier this year. And their Arlington apartment feels smaller than ever.
“We have really started to wonder,” said Eric Basile, “will we ever get out of this place?”