Sunday, May 09, 2004

Just how unaffordable is the Bay State?

By Robert David Sullivan and Rachel Deyette Werkema, The Boston Globe

MOST BAY STATE FAMILIES long ago reconciled themselves to the idea that they'll never live in Boston's most famously posh suburbs -- places like Wellesley, Weston, and Duxbury. But the zone of communities whose homes are beyond the reach of all but the most affluent families has expanded with astonishing speed, spreading north and south to absorb historically middle-class towns such as Burlington and Canton. If this trend continues, it raises troubling questions about the future of homeownership for the middle class.

Just how much any particular buyer can afford to pay for a home depends on many factors: size of down payment, mortgage interest rates, as well as income. But many consumer finance organizations and real estate associations use a formula of 2.5 times household income as a rule of thumb for affordability. Apply even a slightly more generous standard, three times income, to the Massachusetts housing market and it's easy to see why the dream of homeownership is forcing middle-income families farther and farther from Boston.

These two maps compare the median sales price for single-family homes in each town to the state's median household income, the first in 1999 and the second in 2002. The median is the mid-point of a distribution, so half of all household incomes (and half of home sales prices) are above the median and half below; thus, the maps show how many multiples of a middle-class Massachusetts household's income it would take to pay for a home priced in the middle of those sold in each community that year. In 1999, the median household income in Massachusetts was $50,502; in 2002, $51,470.

In our maps, we put towns in the most affordable category if the median sales price was up to three times median household income, that is, a price of $151,506 in 1999 and $154,410 in 2002. The least affordable towns are those where the median sales price exceeded six times median income, or $303,012 in 1999, $308,820 in 2002.

By this measure, less and less of the state -- and virtually none of eastern Massachusetts -- is in the price range of middle-income Massachusetts households. In just three years, the number of communities in the most expensive category jumped from 43 to 106. While many of the newly pricey neighborhoods were in "suburban sprawl" territory, long-settled cities such as Medford, Newburyport, and Somerville also moved into the top category.

In that same period, 41 communities, including Clinton, Fitchburg, and Swansea, moved out of the most affordable category by one step (up to three-to-four times median), while 27, including Attleboro, Lunenburg, and Methuen, skipped ahead by two categories. Another four towns -- Berkley, Harwich, Mashpee, and Rehoboth, all in the southeastern part of the state -- jumped even further, landing somewhere between five and six times median income.

As of 2002, New Bedford was the only community east of Worcester where home prices were less than three times the state's median annual household income. Brockton, Lawrence, and Lowell were the only communities within Interstate 495 where a typical single-family home could be bought for less than four times the median income.

Of course, it's not impossible for a middle-class family to find an affordable home. Even in some of the most expensive communities, as many as half of the home sales do come in under $300,000 (though many of the towns in this category have median prices far above that). But because so much of the housing stock has become off-limits to middle-class families, particularly to first-time buyers, they must look for "bargains" in a wider and wider geographical area -- often adding to commuting costs and making it impossible to change residences without changing school districts. Home prices are rising because a minority of buyers are willing and able to pay them, but they are also driving the home-buying decisions of practically everyone else.

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