Rising home prices and tight supplies are making it costlier for both renters and potential home-buyers in the current housing market, despite the steady recovery from the foreclosure crisis and Great Recession.
Robust demand, combined with extremely tight inventories of both for-sale and for-rent homes, are adding to ongoing concerns about affordability, according to a new report by the Joint Center for Housing Studies of Harvard University.
At last count in 2015, the report finds, nearly 19 million US households paid more than half of their incomes for housing.
In 2016, national home prices surpassed their pre-recession peak, the report says. The Harvard researchers found that nominal prices were up last year in 97 of the nation’s 100 largest metropolitan areas. Meanwhile, longer-term gains in real prices varied widely across the country, with some markets seeing home price appreciation of more than 50 percent since 2000. However, other markets registered just modest gains or even declines. These differences have added to the already substantial gap between home prices in the nation’s most and least expensive housing markets.
“While the recovery in home prices reflects a welcome pickup in demand, it is also being driven by very tight supply,” says Chris Herbert, the Center’s managing director. “Even after seven straight years of construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970s.”
According to Herbert, a stronger supply response is going to be needed “to keep pace with demand—particularly for moderately priced homes.”
The national homeownership rate appears to be leveling off. Last year’s growth in homeowners was the largest increase since 2006, and early indications are that home-buying activity continued to gain traction in 2017.
“Although the homeownership rate did edge down again in 2016, the decline was the smallest in years. We may be finding the bottom,” says Daniel McCue, a senior research associate at the Center.