Harvard University's annual State of the Nation's Housing Report shows skyrocketing costs of both owner-occupied and rental housing. But there may be some relief on the way.
Since the onset of the pandemic, housing markets have set new records, with 2.2 million new homeowners added between the first quarter of 2020 and the first quarter of 2022. The report released in June finds that with demand far outstripping supply, both home prices and rents rose at their fastest pace in decades.
Dan McCue is a senior research associate at the Joint Center for Housing Studies.
“Construction responded to this rise in demand for housing starts were up 16% Over the past year, single family starts were up by over a million for the first time in 13 years," said McCue. "Multifamily starts were up by 30-year highs. But completions didn't quite match starts. Supply chain delays lengthen the time to completion. So perhaps the even bigger story here that the number of units under construction is higher than at any time since 1973. But the supply chain delays not only added to time, but the costs, the shortage of building materials, the global disruptions and the other inflationary pressures have led to even higher material costs.”
The study found investors contributed to squeezing the housing supply, purchasing moderately priced homes in urban markets and either flipping them or renting them out for profit. Also noteworthy is that between December 2021 and April 2022 some 10% of households were behind on rent or mortgage payments.
Center managing director Chris Herbert:
“We're seeing that even though where's the slowdown in the housing market, homes are still selling," Herbert said. "And so there is a lot of both pent up demand, and both for housing, that people are still trying to find that home that they really want to get into, and are willing to spend the money to get into it. So I think at this point, you know, the fact that we have unemployment as low as it is, people's, you know, household balance sheets are still in really strong position. And the fact that the housing supply is so tight, is giving people confidence to say, ‘I know I want to be in that house a long time, I'm willing to buy it.’ “
The Federal Reserve has moved to tame inflation by raising interest rates.
The report shows monthly mortgage payments are increasing for first-time homebuyers, who will need to plunk down more than $27,000 for a down payment. Two-thirds of the top 100 housing markets experienced record-high home price appreciation rates at some point over the past year.
Susan Cotner, the executive director of non-profit Affordable Housing Partnership in Albany, says the Harvard report shouldn't discourage people looking to buy a home.
“There are some really great programs that only ask that the consumers have a 1% contribution towards their down payment," Cotner said. "And then they can use gifts and grants for the balance of the money. So they still need to come up with 3% down.”
Cotner suggests potential homebuyers start saving money immediately.
“There's kind of an old saying, right, ‘the time that's right for you to buy is when it's right for YOU to buy,’ and everybody is different in terms of their readiness, and their financial capacity and that type of thing," Cotner said. "We really do encourage folks to take a look at where you're at Credit Wise and make sure that, again, when the time is right for you, that you're in the best financial position you could possibly be in. Again, we give tips like, you know, save the difference between what you're paying in rent now and what you might be paying for a mortgage payment, right? And use that money to help build up your down payment reserve.”
Cotner admits that for some, it may be more difficult to qualify for a mortgage. She says she sees more families trying to buy together, for example a mother and a daughter and a grandson filing a joint application.
“One thing that we learned from the pandemic was that there was a lot of competition for housing from families who were from outside of the Capital Region, right? With the shift to remote work, people no longer felt like they needed to stay in the city center to be near their jobs," Cotner said. "So folks, especially in you know, counties like Columbia and Greene just saw a lot of pressure from outside investment, you know, people moving into the community and kind of pricing out existing residents. So that's been kind of a tough, tough issue to deal with here in the Capital Region in terms of the price competition.”
The partnership conducts online workshops to assist buyers in the purchase of a new home.
Harvard researchers forecast things might get a little bit worse in the short term. But over the next five years, considering increasing supply and moderating demand, they expect the market for buyers will improve.
