A new Harvard University report on the US Housing market has painted a grim picture showing that the country’s housing recovery has slowed down dramatically and that home ownership rates, previously the hallmark of ‘the American dream’, are at all time lows.
The State of the Nation’s Housing report released by Harvard’s Joint Center for Housing Studies, showed home ownership fell to just 64.5 percent in 2014, nearly wiping out all the gains from the last 20 years.
Chris Herbert, Managing Director of the Center said “the number of homeowners fell for the eighth straight year, and the trend does not appear to be abating.”
Single-family construction stayed at near historic lows, while existing home sales slowed.
There was ‘good’ news however for the rental market which continued to grow with indication the 2010’s will set records for renter growth. It remains to be seen, however, if renter growth is in fact good for the U.S. economy as a whole, which has traditionally thrived most when home ownership rates are high.
An increase in renting, while good for landlords, could very well be detrimental to the health of the country.
The report warns with rent increases and incomes lower than pre-recession levels, the country is also seeing the number of cost burdened renters at record numbers. This included in higher income renter households.
“While affordability for moderate income renters is hitting some cities and regions harder than others, an acute shortage of affordable housing for lowest-income renters is being felt everywhere,” said Herbert. “Between the record level of rent burdens and the plunging home ownership rate, there is a pressing need to prioritize the nation’s housing challenges in policy debates over the coming year if the country is to make progress toward the national goal of secure, decent, and affordable housing for all.”
While the preference of millennials to rent instead of buy is often given as the reason for rising demand for rental properties, the report found that in fact households with an average age of 45–64 accounted for approximately twice the share of renter growth compared to households under the age of 35. Also households with the top 50 percent of the income, although usually tending to own homes, were renting more, being 43 percent of the growth in renters.
The rising demand for rentals resulted in the national vacancy rate falling to its lowest in nearly 20 years, causing an average rental increase of 3.2 percent in 2014 which is twice the rate of overall inflation.
“To meet this demand, construction started on more multifamily units in 2014 than in any year since 1989,” says Daniel McCue, a senior research associate at the Joint Center, “And if job growth continues to pick up, we could see even more demand, as young adults increasingly move out of their parents’ homes and into their own apartments.”