Boston’s broken real estate market is getting worse
Almost everyone is ready to tell a real-life real estate story. The one I was hearing the other day was from a broker recounting how a client paid $200,000 over asking price, outbidding three others, for a 1,200-square-foot condo in Brookline.
Then there’s the story of the young couple, who, after making a handful of losing bids for a starter home, retreated back to the rental market. And there’s the story of the couple looking to enter the market and found immediate rejection. They were turned down by a broker — it wasn’t worth her time trying to find them a home.
Now that the spring real estate market has sprung, it’s time to appraise its unpleasant underbelly: The Boston area real estate market effectively is broken for many buyers. Inventory is tight in general, and certainly there’s not nearly enough entry-level supply. It seems fewer homeowners are trading up. Add in the impact of cash-rich investors and foreign buyers, and you have a market that is wonderful for sellers but often miserable for ordinary home hunters.
Boston’s real estate market is only normal when compared to New York and Silicon Valley. (True story: My high school buddy’s 1,900-square-foot house in Menlo Park is worth about $1.8 million.) To the fundamental policy issue — the need for a reasonably accessible home market for our next-generation workforce — Massachusetts consistently has not found an answer. The invisible hand of capitalism has not adequately responded to meet entry-level demand. Instead, developers prefer to build luxury units, catering to another class of buyers where more money can be made.
It’s part of a longstanding public policy impasse: We know we’ve got a problem, but the issue never rises to the level of urgency that inspires cohesive political action. We may quietly enjoy watching our home prices escalate without appreciating the consequences of torturing a new generation of would-be homeowners. What could possibly be a problem in having one’s home equity rise by $100,000 in two years?
It’s not broken for us, it’s broken for them, the home hunters competing on the unforgiving front lines of the real estate market. Old rules are being augmented with new ones. Are they prequalified? Of course. Willing to bid over asking? You bet. Also willing to waive the mortgage contingency, meaning they would remain on the hook for buying the property if the financing falls through? Well, OK, if I have to. Also willing to waive the inspection contingency, committing to the purchase no matter what the inspector finds?
That last question increasingly is the difference between winning a bid and not. Imagine being a new home buyer facing the biggest purchase of your life — and feeling pressured to make it on blind faith.
Victories do come to the persistent first-timers. If buyer’s remorse sets in, perhaps it’s from wondering why they just paid $600,000 for a small-ish condo on the outskirts of the city when a friend paid $350,000 for a mini-mansion in Raleigh, N.C.
Some young professionals size up the situation and decide to vote with their feet. Massachusetts doesn’t count who leaves, but the US Census Bureau does. We continue to lose population to places like Denver, Atlanta, and Dallas (seriously, who can afford to transfer here from Dallas?). And we don’t count the additional jobs we’d have in Massachusetts if only we had the people to fill them.
The gatekeepers are blocking the desperately needed supply. Stingy Board of Zoning Appeals members don’t see themselves as job killers, but they are. They routinely turn down multifamily projects with impunity, and may feel justified because we lack the transportation infrastructure to support them.
There are distant signs of housing hope. A bill to require cities and towns to create multifamily zones passed the Senate last year. Although it went nowhere from there, the issue of tackling zoning to permit more housing creation is gaining steam, says Clark Ziegler of the Massachusetts Housing Partnership.
Ziegler offers this radical thought in a region dominated by idiosyncratic home rule: “We’re ultimately all in the same boat.” It’s not enough for the City of Boston to generate a lot of units if the Newtons of the world don’t also pitch in.
Meanwhile, the real estate stories multiply: A former colleague transferred to Charlotte and is closing on a 3,000-square-foot-house for about $450,000. He loves the area and is urging all his friends to join him.
George Donnelly is a communications consultant at Northwind Strategies and the author of “The Boston Economy: Understanding and Accessing One of the World’s Greatest Job Markets.”