State Of The Nations Housing 2019.
With the economy on sound footing and incomes ticking up, household growth has finally returned to a more normal pace. Housing production, however, has not. The shortfall in new homes is keeping the pressure on house prices and rents, eroding affordability—particularly for modest-income households in high-cost markets. While demographic trends should support a vibrant housing market over the coming decade, realizing this potential depends heavily on whether the market can provide a broader and more affordable range of housing options for tomorrow’s households.
Housing markets lost steam at the end of 2018 as interest rates rose and new construction, home sales, and price appreciation all slowed. But even as rates came back down in early 2019 and helped to stabilize markets, the national housing supply remained constrained by more than 10 years of historically low production levels. The tight supply of homes for sale is keeping the pressure on prices in much of the country, while high land prices, labor shortages, and restrictive land use policies limit development of moderate-cost housing.
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Supported by rising incomes, household growth is now back to levels more in keeping with adult population growth. Even so, high housing costs have prevented many young adults from living on their own, especially in expensive metros. Growing income inequality is another serious drag on household formations. Over the next decade, the fastest growing household types will be younger families and older empty-nesters—households with very different housing needs. The growing share of foreign-born households will also add to the increasing diversity of demand.
The number of US homeowners increased again in 2018, lifting the national homeownership rate for the second consecutive year. With demand picking up, real home prices are approaching pre-crisis levels, helping to build substantial equity for current owners but also eroding affordability for first-time homebuyers. Indeed, affordability is an increasingly serious challenge for would-be homeowners in several high priced metros.
Rental markets are basically stable despite the upturn in homeownership. Demand from higher-income households is still on the rise, and construction of rental housing picked up again last year after a slight dip. Low vacancy rates across the board are pushing up the prices of multifamily properties, while also keeping the pressure on rents. Conditions at the lower end of the market are especially tight, with high demand for a shrinking supply of low-cost units adding to affordability concerns.
Despite signs of progress, the shortage of affordable housing remains acute, especially for lowest-income households. While the number of cost burdened homeowners has fallen substantially since the peak of the housing crisis, the number of cost-burdened renters is still near record highs. After years of declines, homelessness increased slightly in 2018, reflecting widespread housing insecurity. In the absence of any meaningful increase in federal funding for affordable housing, some states and localities are acting to expand the supply and provide new protections for tenants.
Information courtesy of Joint Center for Housing Studies of Harvard University.
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