Home prices have risen dramatically over the past two years as growth in the number of households and rising home demand have met limited housing supply. From April 2021 to April 2022, the median home price nationwide rose by $50,500 to $391,200, while the interest rate for an average 30-year, fixed-rate mortgage jumped from 3.06 percent to 4.98 percent. While the market has begun to slow down recently, home prices remain high. These trends have put owning a home farther out of reach for many first-time buyers, including many households of color.

This summer, we researched how today’s tight housing market has created distinct challenges for lower- to moderate-income and first-time buyers. We did so through a qualitative case study of the housing market in Brockton, Massachusetts, a city of around 100,000 residents located 25 miles south of Boston. Since the 1990s, it has gained popularity among first-time homebuyers of color, notably Cape Verdean and Haitian immigrants and in 2019, it became the first majority Black city in New England. The city features a downtown rental stock of aging triple-deckers and apartment buildings, surrounded by subdivisions filled with modest 1960s and 1970s ranch homes. While Brockton has long offered some of the most affordable homeownership options in Greater Boston, its home prices have shot up dramatically under the strain of new demand and regional affordability challenges. Single-family homes reached a median price of $450,000 in June 2022, up 50 percent from the median price of $300,000 in June 2018.

Our examination of Brockton’s housing market draws on ethnographic research since 2019, an analysis of online listings, and interviews with real estate agents in Brockton. While many dynamics of Brockton’s housing market are locally specific, the case study helps us better understand how intense competition for housing and growing unaffordability have created new inequalities in homeownership nationwide.

Key Finding I: Tight Housing Markets in Metropolitan Cores like Boston Can Create Ripple Effects of Displacement across the Region

Tight housing markets have limited where moderate-income and first-time buyers have been able to buy. We found that many first-time homebuyers can no longer afford Boston and have been pushed to farther out communities like Brockton. There, in turn, the migration of Brockton residents creates what we call “ripple effects of displacement,” as housing unaffordability pushes residents from one community to the next.

The realtors we interviewed reported that many homebuyers in Brockton had moved from Boston. Boston neighborhoods such as Dorchester have seen steep price increases; the average asking rent for a one-bedroom Dorchester apartment reached $1927 in August 2022, up 11 percent from $1732 in August 2019. The median sale price for single-family homes in Dorchester reached $845,000 in July 2022. Homebuyers moving from Boston found Brockton relatively affordable. Adelino Vicente, a Cape Verdean immigrant and real estate broker in Brockton, noted that more than half of the buyers in Brockton are coming out of Boston, which drives up prices and makes it difficult for Brocktonians to buy in their hometown.

But this southward displacement does not stop at Brockton. Five realtors mentioned the cities of Fall River and New Bedford, both located over 50 miles from Boston, as new destinations for Boston area buyers. Indeed, Brockton’s price growth surpassed Boston, while the cities of Fall River and New Bedford saw even steeper increases (Figure 1). Our findings indicate that affordability challenges in cities like Boston create these ripple effects of displacement across the metropolitan area.

Figure 1: Brockton Saw Steep Single-Family Home Price Growth 2018-2022

Note: Median Sale Price of Single-Family Homes

Source: Redfin.com Housing Market Trend Data, 2018-2022

Key Finding II: Many Lower-Income Buyers, Including Buyers of Color, Rely on FHA Loans but Struggle to Compete against Buyers with Conventional Loans

Many homebuyers in Brockton, especially first-timers, use mortgages insured by the Federal Housing Administration (FHA), which seeks to serve underserved borrowers who would not typically qualify for a conventional loan. FHA loans carry lower credit score requirements and down payments as low as 3.5 percent. The Brockton-area realtors we interviewed all work with majority-FHA clients, and some noted that FHA buyers comprise up to 90 percent of their base. First-time homebuyers and Hispanic and Black homebuyers disproportionately rely on FHA loans to finance their home purchases.

Nonetheless, our findings indicate that in this tight housing market, FHA borrowers often lose out during competitive bidding. Bre-Anna Rodrigues, who works in her family’s real estate agency, said she has seen sellers reject buyers with FHA loans over those with conventional loans. FHA transactions require an FHA-certified inspector to conduct a home inspection and appraisal. Any issues, including chipped paint or cracked windows, need to be resolved before the home is sold. These bureaucratic requirements can make it hard for FHA borrowers to compete against bidders with conventional loans, who can waive contingencies such as inspection.

We also found a persistent stigma of FHA loans being less desirable. Charles Lima, realtor with a national brokerage, mentioned how some realtors contribute to this stigma, discouraging clients from accepting FHA offers. Some realtors thought that this stigma and lack of knowledge about FHA varied regionally. In a competitive market where sellers are choosing between multiple bids, stigma against FHA buyers is not only amplified, but leads to FHA buyers losing out on homes they are qualified for.

At the same time, in lower-income Brockton, where many realtors relied on a client-base that overwhelmingly used FHA loans, some realtors indicated their efforts to ensure the success of FHA sales. Several sellers’ realtors said they flagged issues before a pending sale, anticipating a likely sale to an FHA borrower in Brockton, or enlisted construction connections to help a home pass inspection.

As housing affordability has become an increasingly regional problem across the nation, it demands regional solutions - ranging from zoning reforms, to incentivizing the new construction and maintenance of the affordable housing stock. Moreover, rising prices have not only limited buyers’ options, but those using FHA loans are sometimes locked out from houses that they can afford. This stigma against FHA buyers may be geographically distributed, as realtors in this lower- to moderate-income market displayed higher willingness to work with FHA borrowers, while realtors in higher-income markets may lack familiarity. Additional education of realtors on this loan product may help mitigate the stigma of FHA and help FHA borrowers compete across all kinds of markets.