As freshmen struggle with their first housing lottery and upperclassmen go off-campus house hunting, college students are joining people across America who are worried about housing.
Because the falling price of real estate has given homeowners fear that their properties' values will continue to decline and discouraged the purchase of property, many Somerville and Medford homeowners are renting instead of selling - but potentially at higher prices.
When the United States underwent a recession from 2001 to 2002, soaring real estate prices contributed to a booming U.S. property market that helped alleviate the worst of the economic slump. But when property prices reached unsustainable levels in 2006, the housing bubble began to deflate, dropping the value of property and leaving a slew of unsold homes on the market.
As housing prices continue to fall, many homeowners have found themselves paying mortgages higher than the actual value of their homes. The problems are compounded by higher interest rates that have made it harder for homebuyers to make payments.
During such a downturn in the market, few people choose to buy homes out of fear that their property will lose value. According to Tufts Off-Campus Housing Coordinator Donna Rodriguez, this phenomenon is now occurring in the areas immediately surrounding Tufts.
"Because they [homeowners or landlords in the area] can't sell their houses, they start to rent [instead] at reasonable prices," Rodriguez said.
Rodriguez added that people in the area are no longer buying houses, fixing them up and then re-selling them because they don't want to take a loss. As a result, a number of homeowners she has spoken with this year are looking to rent their houses to Tufts students for the first time.
But while the supply of rental homes may be increasing for Tufts students, David Thorpe, a landlord who owns property on nearby Bromfield Street, said that demand for rent is also increasing due to a backlash from the subprime mortgage crisis and subsequently may drive rental prices up.
"Since the ... requirements for the borrower to get a mortgage have become more stringent, there are many who cannot buy and must rent," he said. "The national trend, therefore, is more people looking to rent, and the demand curve is going up ... Therefore, the price to rent is going up."
Thorpe said that he plans to rent out his properties, some of which have declined up to 20 percent in value, for at least another year and half before he thinks about selling them.
But the rise and fall of the national housing bubble has not affected all areas of the country equally.
Based on the Home Price Index, Massachusetts' housing prices appreciated 86.6 percent from 1998 to 2006, the eighth-highest rate in the country.
"Housing prices in Massachusetts increased more than the rest of the United States," Tufts Professor of Economics Yannis Ioannides said.
And while housing prices in Massachusetts appreciated more than the national average during the housing bubble, they are not falling as quickly as other areas.
"The numbers for 2007 show that house prices declined nationally by 9 percent but only by 3 percent in Massachusetts, so [the state] is not doing as badly as the rest of the country," Associate Professor of Economics Jeffrey Zabel said in an e-mail.
"My own research shows that for the last downturn (late 80s to early 90s), it took seven years, from 1989 to 2006, for prices to return to their nominal levels in 1989. We may face a similar cycle this time," Zabel added.
Both Rodriguez and Ioannides agreed that effects are not yet notable and that big changes in prices would occur gradually, if at all.
"It's too early to tell [the full effects] ... There are foreclosures in the immediate area that go back on the market, but it will be a while before Tufts students see the effects," Ioannides said.
Rodriguez said that regardless of the housing crisis, prices vary regularly, and that Tufts students will not be greatly affected. "I don't think there will be a big change in prices ... prices vary by the month," she said.
