Jenifer B. McKim
Globe Staff / June 14, 2012
The US housing market, and the Boston area in particular, have likely reached bottom and will slowly start to recover this year, according to Harvard University researchers who are scheduled to release an annual housing report Thursday.
More than six years after the country’s housing market pitched into a deep slide, Harvard’s Joint Center for Housing Studies said a recent increase in home sales, coupled with low inventories of available properties and rising rents point to a turnaround in housing prices.
“There are lots of positive indicators here,’’ said Eric S. Belsky, managing director of the housing center. “A floor is beginning to form under home prices.”
The center’s 2012 report, scheduled to be released Thursday at the Ford Foundation in New York City, contrasts with the forecast it released last year in which Harvard accurately predicted the US housing market would remain sluggish through 2011 as potential buyers remained on the sidelines out of fear prices would continue to fall and the economy still struggled.
For this year, Harvard researchers’ view of the Boston area is even brighter, primarily because the local economy is in relatively better shape than elsewhere in the country, and housing values did not fall as much. The online brokerage firm Redfin reported Wednesday that Boston-area home sales increased by 21.5 percent and median prices jumped 5.5 percent in May compared with the month before — significantly higher than the United States.
“We are definitely going to be in front of the trend,’’ said Alex Coon, market manager for Redfin in Boston. “I think 2012 is going to be the base that the recovery for housing is built on.”
But the recovery will not be felt equally across the country. Michael Rubinger, chief executive of the nonprofit New York-based Local Initiatives Support Corp., said low-income communities continue to struggle with high jobless rates and too many underwater properties — where the house is worth less than its mortgage debt.
“I would like to think we turned the corner,’’ Rubinger said, but “I’d have to say the jury is still out.”
The Harvard report noted there are more than 11 million US homeowners who owe more money on their mortgages than their homes are worth. Another downward pressure point on the market is the huge backlog of homes in foreclosure — some 2 million nationwide.
But on a broader basis, sales of both new and existing homes are increasing at a strong pace, and Belsky said that uptick is significant because it is occurring without federal tax incentives such as a first-time home buyer’s tax credit that prompted a surge in buying several years ago. Increased home sales also should spur construction, an added boost to the economy, the report said.
Another possible boost to home sales, Belsky said, is the rising cost to rent. In Boston, for example, rents climbed 7 percent between 2010 and 2011 and are expected to show similar advances this year, said Ishay Grinberg, president of Somerville-based Rental Beast Inc., which maintains an online rental database. Those increases mean apartments in Boston are now approaching houses in cost. According to Harvard researchers, median rents in the Boston area are at $1,171, while the typical monthly mortgage payment here is $1,269, based on homes sold at the median price and a 20 percent down payment.
Nationwide, the typical renter paid an estimated $881 a month to rent an apartment in December, while the typical homeowner paid $625 a month, according to Harvard. Belsky said current conditions suggest many would-be buyers will find that owning a home is a better deal than renting.
“As markets tighten, these fence-sitters may begin to take advantage of today’s lower home prices and unusually low mortgage rates,’’ Belsky said. “Monthly mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s.’’
David Stevens, chief executive officer of the Mortgage Bankers Association based in Washington, D.C., said a recovery would be even stronger if lenders were able to loosen strict lending requirements. He said lenders have become increasingly strict about financing buyers, prompted by increased government regulations and concerns about legal liability.
“We are seeing very good signs of recovery but it is not as strong as it should be,’’ Stevens said.