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Region's affordability gains shortlived?
The Boston Fed's Robert Clifford has updated the Fed's 2006 affordability working paper, drawing on data through 2008 to see how housing affordability has been affected during the real estate market slump. Not surprisingly, the Fed found that as housing prices have declined, affordability in New England has increased more than in other parts of the country.
Clifford found that Greater Boston has seen greater gains in affordability since 2006 than notable competitor metropolitan areas. For example, Boston has gained low-cost areas like Seattle and Raleigh-Cary, NC, and has continued to pull away from high-cost areas like New York and San Francisco.
Clifford cautions that Boston's affordability gains may be partially due to timing as prices peaked in 2005 and fell 15.3 percent through 2008. Meanwhile, prices in Chicago, New York, Philadelphia and Seattle continued to rise in 2005 and steep declines did not begin until 2007 and 2008. Clifford writes that Boston's affordability gains may dissipate as prices stabilize here while they continue to drop in competitor cities.
One of the interesting things about the Fed study is that it looked at housing affordability for three demographic groups, one of them being college graduates ages 25-39. Why?
Given the mobility of young professionals and the strong demand for their labor skills, the affordability of housing for this group could potentially indicate whether the cost of housing affects New England's economic competitiveness.
The Fed update found that young professionals in New England have more annual income and can afford median-priced houses in the region, but that they can get more "bang for the buck" in other regions and have less discretionary income after dealing with the region's high housing costs.