I recently attended The Greater Boston Real Estate Board Economic Expectations Seminar which talked about what to expect in 2015, and it was interesting what was mentioned. At the Economic Expectations at the Federal Reserve building in downtown Boston, there were two experts that spoke Michael D Goodman and David Stiff. Michael D Goodman is a professor at UMass Dartmouth who is an associate professor in public policy and executive director of public policy and, David Stiff is a principal Economist with Case-Shiller with core logic.
In order for a person to buy other sectors have to improve and during the seminar, it was reported that the corporate sector has improved and corporate America profits have never been higher. Our banks are in better shape than they were during the great recession, and are reporting they have plenty of capital. The American consumer is also starting to feel better about the economy and have more deposable income. The market is starting to see consumers spend more of their disposable income than they did in the past. Even though the consumer is spending more that doesn’t mean their wages have increased. Wage growth continues to lag and this must improve. The view of the United States doing business or buying a home is viewed by the outside world as a risk-free place even with our deficit. Buying a home right now is cheap money with interest rates low. Banks still have a foreclosure on their books, but it is no longer dominating the marketplace.
In regards to the State of Massachusetts, our job market has finally recovered the jobs lost in the great recession, however, most of the jobs lost are in metro Boston. We started seeing a recovery in the last six months, but the improvements in the labor market have been very broad and not all areas of Massachusetts has seen improvements when talking about jobs. Jobs, where they have seen improvement from the great recession, have been construction, trade and transportation, education and health services, and leisure and hospitality. Remember I mentioned not all of Massachusetts has seen improvement in the job sector or growth. People who have been unemployed for six months or longer have had a much harder time finding employment not because they haven’t tried, but because employers view them as something is wrong with them. It’s as if there is a sign on the door saying Help Wanted the No Jobless Need not apply. Meaning if the job seeker has no job experience that is six months or longer then the employer is passing on them. That stigma must change when looking at a potential job seeker to see a full recovery. In the state of Massachusetts, the annual average unemployment rate was 15.8% for workers under 25 years old and for those who hold just a high school education, it was 20.1% in 2013.
On a global level, the United States as I said is far less risky especially when you look at other countries however the global economy is just plugging along and we need the economy to really improve more and if it doesn’t we might be up for a downtown.
When it comes to Jobs in Massachusetts, we are very unbalanced. We are seeing job market improve in Boston, but when you look at areas outside of Boston you are seeing a very unbalanced job recovery. This uneven job market is affecting the housing recovery. Housing recovery overall has improved and some markets are seeing prices that have improved back to before recession prices however like the job market not all of Massachusetts is seeing improvements. The highest gains have been in the I-495 area. Towns like Brockton, Hyannis, Gardner, New Bedford their home prices have not come up in price. If home prices do not rebound it will make it a less desirable place for home buyers to invest in and it will have a downward spiral on the community from resources available and jobs.
Other issues that are facing Massachusetts is residential development is increasing but it must increase not just in Greater Boston Area it has to increase all over Massachusetts which is not happening right now. Another thing that should be noted in Metro Boston we are seeing a lot of residential new development, however, the BRA Boston Redevelopment Authority has approved more residential development however not for Condos. Most of the projects that are being built or have been built are for residential rentals. Part of the reason why there is so many residential rentals being built is due to the fact that it is easier for a developer to obtain financing to get the project off the ground and going. Many agents including myself feel that if developers could obtain financing easier and make most of the buildings being built both Condos for sale and rentals the market could become a little bit more balanced. Zoning Laws also need to be revamped throughout mass in order to keep up with demand. Regardless homes need to be built not just in Metro Boston, but throughout the state of Massachusetts to see growth. Most of the housing production is below the averages right now and what is being built are multi-families. The buyers who are buying homes are both Baby Boomers who are downsizing from Single Family Homes to condos and Millenniums are buying homes however they are delaying buying a home which goes with the trend. Every generation after the baby boomer generation has delayed home buying. Most young professionals buying a home unless they are starting a family are not buying single-family homes, but are buying condo’s which would explain why this market has limited inventory and high prices.
Who will drive the market? Will it be Baby Boomers, Generation X, Y or Millennial? The answer is millennials will eventually drive the marketplace. As I said every generation has been delayed on those big events in life and Millennial’s right now are more set on renting a home they will buy and when they buy they will drive the marketplace. They make slightly more than the generation before them, but they benefit from lower rates and a better employment right then the prior generation. The Millennial make of 70.2 of the population. The Average age of the Millennial is 31 years of age. This generation may be less likely to buy a single family home or a home that is bigger than they really need, but they will eventually buy. Like the Baby Boomers, this generation will drive the marketplace in the long run.
Besides the Millennial driving, the market Boston has been extremely attractive to the international buyer. Boston has seen recently a surge of buyers who are buying homes in Boston. Buyers from China have been buying up real estate especially in the metro areas. Some are buying homes in Boston to plan for when their children attend higher education, but there are some buyers who are just buying because they feel it’s a good investment. I will never forget reading Boston Magazine Boston China Town issue which addressed the new buyer in the market is from China and some folks featured in the article had no children, not married and not looking to call Boston home solely buying the property as an investment. Other people mentioned in the article had children in the next few years most likely going to attend school in Boston and knowing that on-campus housing is a tough thing to find so they are buying a place now since it’s cheaper than owning in their home country.
2015 will be an interesting year, and we have to hope that interest rates remain low and a tax credit that is up for renewal get renewed by Congress. Buyers will have to patient in the buying process since they might not find the home of their dreams on the first try and sellers will continue to see the benefits of limited inventory. We might see some bumps in the road if on a global scale things don’t improve, but they should just be bumps in the road here in Boston. If you have questions about this blog or would like to list your home or looking to buy contact me anytime. Happy Hunting in 2015!
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