The latest State of the Nation’s Housing report from the Joint Center for Housing Studies at Harvard University (JCHS) shows the national housing market is still pretty bipolar. While the national market now has enough momentum to be an engine of economic growth, the lingering pressures on homeownership, the eroding affordability of rental housing, and the growing concentration of poverty are very much in the way.
According to the report, robust rental demand continues to drive the housing expansion, and sales, prices, and new construction of single-family homes are on the rise. Even more important, income growth has picked up, particularly among the huge millennial population that is poised to form millions of new households over the coming decade.
However, the national homeownership rate has been on an unprecedented 10-year downtrend, hitting an unusually low 63.7 percent in 2015. Chris Herbert, managing director of JCHS, blamed tight mortgage credit, a decade-long falloff in incomes that is only now ending, and a limited supply of homes for sale for keeping households, especially first-time buyers.
“And even though a rebound in home prices has helped to reduce the number of underwater owners,” Herbert said, “the large backlog of foreclosures is still a serious drag on homeownership.”
Moreover, the report finds that income inequality has increased over the past decade, with lower-income households‒‒those earning under $25,000 a year‒‒accounting for nearly 45 percent of the net growth in US households between 2005 and 2015.
JCHS suspects that as the lingering effects of the housing crash fade, homeownership may regain some lost ground. But when? And how? It’s certainly not a matter of people being uninterested in owning homes, Herbert said.
". . .the large backlog of foreclosures is still a serious drag on homeownership.”
Chris Herbert, Managing Director, Joint Center for Housing Studies, Harvard
“The question is not so much whether families will want to buy homes in the future, but whether they will be able to do so.”
Mirroring the persistent weakness on the owner-occupied side is an increase in rental housing demand across all age groups, income levels, and household types. On the upside, with vacancy rates down sharply and rents climbing, multifamily construction is booming across the country. But strong growth is mostly for high-income renters. Rents are well out of reach of the typical renter making $35,000 a year, making this new housing the doyen of the upper end of the market, the report found.
JCHS also found that residential segregation by income has increased.
“Between 2000 and 2014, the number of people living in neighborhoods of concentrated poverty more than doubled to 13.7 million,” said Daniel McCue, a senior research associate at the Joint Center.
JCHS blamed a lack of strong federal response to the affordability crisis, which it said has left state and local governments struggling to expand rental assistance and promote construction of affordable housing in areas with access to better educational and employment opportunities through inclusionary zoning and other local resources.
“Policymakers at all levels of government need to take stock of what can and should be done to expand access to good-quality, affordable housing that is so central to the current well-being and potential contribution of each and every individual,” Herbert said.
Click here to view the complete report.