davis_square | City of Somerville Discussed in Housing Report Card

The Center for Urban and Regional Policy at Northeastern University released a report titled The Greater Boston Housing Report Card 2005-2006 on September 27, 2006. "The Report Card is a diagnostic tool that provides an annual assessment of the region's progress toward providing housing opportunities for all of its citizens. It focuses on housing production in 161 cities and towns including and surrounding Boston and examines trends in housing prices and rents, the preservation of affordable housing, and state and federal funding levels for subsidized housing." http://www.curp.neu.edu/sitearchive/thisweek.asp?id=2312.

The full Report is available here.

The Report reveals some interesting statistics about the City of Somerville, including:

The median advertised rent for a 2 bedroom apartment in the City of Somerville increased 33% from 1998 to 2001, decreased 7.3% from 2001 to 2004, and decreased 7.6% from 2004 to 2005. Report, at 36

44.2% of households in the City of Somerville are low-income. Report, at 67.

The population of the City of Somerville declined 2.4% from 2000 to 2004. Report, at 67 (estimate).

Report authors concluded that a Somerville household earning the 2005 median income can only afford to spend $246,449 on a house. Report, at 70.

Flat | Top-Level Comments Only

I don't get the last bullet point. Does that mean that is the maximum they should pay for a home, or what?

There's some formula people use to determine what would be a prudent maximum amount of debt to go into for a home, but I don't know exactly what assumptions it makes about the down payment you would have, or the interest rates, or what % of your income you should be spending on housing.

Mind you it's possible to get a mortgage for well over the amount one might call prudent (which is I guess convenient as where are you going to find a home in Somerville for $250K? but inconvenient in that you probably shouldn't have been putting yourself in that much debt in the first place, as plenty of Globe stories are now showing...)

The following is a good rule of thumb to follow:

Gross Debt Service (GDS) ratio

Your monthly housing costs should not exceed 30% of your gross monthly income. Included in housing costs are: monthly mortgage principal and interest payments, property taxes, hydro and heating, condominium or strata fees, or your annual site lease for leasehold property.

Total Debt Service (TDS) ratio

Your overall debt load (including housing costs and payments on car loans, credit cards, personal loans and lines of credit) shouldn't be more than 40% of your gross monthly income.

Source: http://www.envisionfinancial.ca/page81.aspx#Afford.

I rephrased the last sentence. Thank you.

So what is the median advertised rent for a 2 bedroom apartment in Somerville?

The 2005 median advertised rent for a 2 bedroom apartment in the City of Somerville was $1,200.00. Report, at 36.

44.2%? Seriously? Is this an east/west split, or is this counting hordes of grad students and their stipends as low-income, or does it say?

By the way, when you reply to your original post instead of reply to specific comments (like you're doing above), people won't get email notifications of your comments, so chances are they won't see them.

I've always wondered what the term "household" meant to government officials. Obviously when there is a family living together, that's one household, but that's not the norm in Somerville. How would a house/apratment that has roommates count? And if they are all lumped into one "household" as far as the government was concerned, what if they are all of different incomes? What if 2 of the roommates were low income (and what does that mean?), and 1 was super rich?

You highlight a good point and the deceptive nature of any study. A study should define terms that it relies on in its statistics. This Reports defines a household as follows:

Households include all family units plus single-person housing units plus units with unrelated individuals and can include more than one family. Families are defined as units with two or more members all of whom are related in some fashion.

Just to run quickly through the numbers:

A $246,449 condo would be about $1300/mo. in interest and principal payments, plus add in about $125/mo. for property taxes and another $200/mo. for condo fees - total is $1625/month. Assumptions: 20% downpayment (~$50K), 7% interest rate, 30 year mortgage, and owner occupied property tax rate. There are 4 2 bedroom condos on the Somerville market for about that amount right now according to boston.com, and 3 1 br condos.

Using the 30% rule stated above, the family would be making in the vicinity of $65,000/year gross. I haven't included any tax deductions such a family might get that would allow them to make a little less money (ie. they'd being paying less than the $1625/month after tax deductions). It's feasible as long as other debts don't exceed $550/month, using the overall debt percentage of 40%.

While $65K income for a couple isn't outrageous, the biggest barrier is probably the 20% downpayment. Sure, "creative financing" exists that allows you to borrow 95-100% of the purchase price, but that's what's getting people in a metric buttload of trouble right now (especially if you include home equity loans/house-as-ATM transactions).

Quick correction on your numbers:

The 20% down payment ensures the consumer is ready for home ownership. A history of saving money on a regular basis is a requirement before one goes and purchases a home. Things in homes break (like a roof for example) which require large amounts of ready cash to fix.

City of Somerville Discussed in Housing Report Card

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