Rebound in housing prices hits important milestone in 2016

Strong demand and extremely tight supplies of both for-sale and for-rent homes are pushing up housing costs. Consequently, affordability pressures are at near record levels, according to findings in the latest State of the Nation’s Housing report.

“Addressing the scale and complexity of need requires a renewed national commitment to expand the range of housing options available for an increasingly diverse society,” stated the authors in their 44-page report.

Researchers reported rises in housing demand, homes prices, and construction volumes, along with sharp drops in the number of distressed homeowners.

National home prices hit an important milestone in 2016, finally surpassing the pre-recession peak. An analysis of the nation’s 100 largest metropolitan areas revealed that prices were up in 97 of the regions. Gains since 2000 varied widely, with appreciation topping 50 percent in some markets while others “posted only modest gains or even declines.”

Other key findings in the report included:

At last count in 2015, nearly 19 million US households paid more than half their incomes for housing.

Even after seven straight years of construction growth, the US added less new housing over the last decade than in any other 10-year period dating back to the 1970s.
The national homeownership rate fell slightly, marking the 12th consecutive month of declines, but researchers believe it appears to be leveling off, thanks in part to last year’s growth in homeowners – the largest increase since 2006.

• Affordability is a growing concern, with an average of only 45 percent of renters in the nation’s metro areas able to afford monthly payments on a median-priced home in their markets. The situation is dire in high-cost metros of the Pacific Coast, Florida, and the Northwest, where fewer than 25 percent of renters could afford such payments. Nearly 39 million US households live in housing they cannot afford.
• High housing costs are a special concern for younger and older households, in part because larger shares of such households are headed by a single adult wage earner. Nearly 47 percent of single-person households (including both owners and renters) were cost-burdened in 2015; nearly 25 million children and about one-third of older adults faced cost burdens in 2015.
• Rental vacancy rates hit 30-year lows resulting in rent hikes that outpaced inflation in most markets.
• Incomes in US households grew overall, thereby reducing the number of households paying more than 30 percent of income for housing (the standard measure of affordability).
• Millennials, immigrants, and older Americans will drive housing demand.

The State of the Nation’s Housing, presented in six chapters and an appendix of tables, includes interactive maps and charts, plus several online data tools. The report is a publication of the Joint Center for Housing Studies, a collaborative unit affiliated with the Harvard Graduate School of Design and the Harvard Kennedy School.