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07/23/2021

JCHS breaks down five of 2021’s leading housing issues

Housing supply along with home and rent prices make their impact on 2021.

The State of the Nation’s Housing report, published annually by the Joint Center for Housing Studies of Harvard University (JCHS), examines a year’s worth of trends and issues impacting the housing industry.

This includes housing policy, market trends, household growth and composition, homeownership, affordability issues, rental markets, and more.

The breadth of issues covered in the report always makes it difficult to come up with a single headline to fully describe the contents of the report, according to Daniel McCue, senior research associate at the JCHS.

But McCue has broken down five of the biggest topics in the current housing climate, as follows:
Inventory of homes for sale at historical lows: By December of 2020, there were just 1.03 million homes for sale. Measured by months of supply (how long it would take for homes on the market to be sold at the current sales rate), the inventory of homes for sale was just 1.9 months, which puts it below 2.0 for the first time since recordkeeping began in the 1980s. As of April 2021, there were still just 2.4 months of supply, or 1.16 million homes for sale nationwide. Historically, a balanced market has been defined as 6 months of avail­able inventory, which has not occurred in the US since 2011.

chart, histogram

Home prices are rising rapidly:  Since mid-2020, home prices have been rising at an accelerating pace. Back in June of 2020, prices were rising at a modest annual rate of 4 percent, but by March of 2021, prices were over 13 percent higher than a year earlier. And in the first quarter of 2021, home prices were up by double digits in 85 of the 100 large markets. Home prices were up more than 20 percent over the past year in some metros, such as Boise (28%) Austin (23%), and Tacoma (22%).

The JCHS notes that months of supply measures how long it would take the number of homes on the market to sell at the current rate, where six months is typically considered a balanced market.

Rents are down sharply for high-end apartments in high-cost markets: High-end urban rental markets took a hit in 2020. When office work shifted to home and restaurants and entertainment venues closed during the pandemic, apartment demand in central urban areas declined. Increased interest in homeownership also hit the high-end rental market during the pandemic as higher-income renters were most able to take advantage of low interest rates to buy homes. Meanwhile, housing construction continued as an essential service during the pandemic and added a substantial amount of high-end supply in many high-cost markets. As a result, rents are down sharply over the past year in several high-cost markets such as San Francisco (-20%), San Jose (-16.5%), New York (-15%), and Boston (-8%). 

Rent declines appear limited to high-end units, however, as lower-quality unit rents remained on the rise throughout 2020, highlighting the continued tightness of markets as experienced by renters with modest incomes. In early 2021, rent growth in urban rental markets rebounded and will likely continue to recover as more in-person activities resume.

Renters and people of color fared the worst during the pandemic: Significant amounts of financial stress remained among households through early 2021, and most measures of financial stress show that renters and people of color have fared worst during the pandemic. In the first quarter of 2021, 17% of all renter households reported being behind on rent. Shares rise to 21%for Hispanic renters and fully 29% of Black renter households, which is nearly three times the 11 percent share reported among white renters. Getting the roughly 7 million renter households in arrears caught up on housing payments before eviction moratoriums expire will be a growing concern in the coming months for tenants, landlords, and policymakers alike.

Measurable levels of distress remain among homeowners as well, with 9% of all owners reporting being behind on mortgage payments early this year. Racial disparities exist here, too, as over 16% of Black, Hispanic, and Asian homeowners were behind on mortgage payments, which is more than double the 7% share among white homeowners. People of color are also disproportionately represented in the nearly 2 million homeowners in forbearance in early 2021 who will be at risk of foreclosure when forbearance periods expire in the coming months.

Unsheltered homelessness is growing: The headline-grabbing numbers related to the hot housing markets may have overshadowed the growing problem of housing security and homelessness highlighted in this year’s report. After declining for several years over the last decade, the number of people experiencing unsheltered homelessness grew in 2020 for the fifth year in a row, and is now up by 50,000 people since 2015. And this measurement was taken prior to the pandemic. With persistently high rates of housing cost burdens making it difficult for millions of low-income households to pay rent even when fully employed and nearly impossible to build emergency savings to cover periods of lost income, our report describes how housing security remains tenuous for millions of lower-income households despite the easing of the pandemic’s impacts.

The JCHS’s State of the Nation’s Housing 2021 report is available here.