Demographics, Demand, and Demise?

It was hard to miss the recent news that MA is losing population. But the recent demographic trends are perhaps weaker and more pervasive than most appreciate. For instance, population growth in MA has stagnated since the turn of the century, a trend last seen in the 1970s (US Census Data).
In Boston the downturn has been even more striking, from 3.31 million residents in 2000-01 to 3.275 million in 2004, a loss of ~35,000 or >1% of the population. The most recent data, while more than a year old, suggest that the trend is accelerating.

We know these demographic trends haven't resulted in weakness in home prices (at least not yet). But what about a housing market that exhibits a more direct response to changes in supply, demand, and affordability - the apartment rental market? From the CURP website, we can see a surge in apartment vacancies that mirrors the declining Boston population.

These vacancy rates are the highest since 1996. Incidentally, the peak in vacancies for the last 20 years was about 7% in 1991-92. Data from Northeast Apartment Advisors demonstrate that the improving supply to demand ratio has caused rents to decline modestly.

If you were a naive observer, having seen these data, would you ever guess that sale prices for homes and condos have been increasing in MA at a double digit pace for the past several years?

What does the future hold?

Predicting future changes in demand is a difficult business, mostly because a housing market is driven largely by psychology. Recently though, a demographic study has raised even more ominous questions about the demand equation in MA.

"Thirty-five percent of boomers said they want to leave the state for their retirement years. As a result, the state could lose 650,000 people -- about 10 percent of its population."

And who could have missed the fact that the first boomers are turning 60 this year. How many are planning on selling to help fund their retirement? How will their plans be shaped by the growing inventory of new and resale homes?