DENVER — After nearly a decade of weak appreciation, home prices across the United States are rising again, driven by strong demand and tightening supply, according to the State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University. The study was released Wednesday during the 51st conference of the National Association of Real Estate Editors (NAREE) in Denver.
Chris Herbert, the Center’s managing director, told NAREE attendees that the number of distressed homeowners has declined sharply, a trend that has helped stabilize the housing market.
Researchers found that nominal home prices increased last year in all but three of the country’s 100 largest metropolitan areas. Long-term real price gains vary considerably across regions: some markets have seen appreciation of more than 50 percent since 2000, while others have posted only modest gains or even declines, Herbert said.
“Last year, home prices finally returned to their previous peak,” Herbert said. “That matters because many people who bought or refinanced during the peak were left underwater. We’ve gone from about 12 million homes underwater to roughly 3 million, and that’s freeing up a lot of capital.”
Still, only 41 of the largest metropolitan areas have reached prior peak values. Another 32 metro areas remain about 15 percent below their peaks, Herbert noted. “It all depends where you are in the country and what neighborhood you live in,” he added. Low-income neighborhoods, in particular, are less likely to have recovered to their pre-crash highs.
A major challenge for prospective buyers is constrained housing supply. “While price recovery reflects welcome demand, it’s also being driven by very tight supply,” Herbert said. He pointed out that the U.S. added fewer new housing units over the last decade than during any ten-year span since the 1970s. “Any excess housing built during the boom years has been absorbed, and a stronger supply response will be needed to keep pace with demand—especially for moderately priced homes.”
“One reason house prices are rising so sharply is that inventories are very tight,” Herbert continued. At the end of last year, available homes for sale were at the lowest level in decades—about 1.65 million units, equivalent to a 3.6-month supply.
Affordability remains a major constraint in many high-cost regions. Daniel McCue, a senior research associate at the Center, said homeownership is challenging along much of the West Coast, in parts of Florida, and across the Northeast because of steep prices. On average, the study found, just 45 percent of renters in metropolitan areas nationwide could afford the monthly payments on a median-priced home in their market. In several high-cost metros on the Pacific Coast, in Florida, and in the Northeast, that share falls below 25 percent.
On the multifamily side, rents continue to climb. The study reports that the rental vacancy rate reached a 30-year low last year and rent growth outpaced inflation in most markets. In a few large metros, including San Francisco and New York, rent growth has begun to moderate.
The report also highlights demographic trends that will shape future housing demand. Millennials—now entering their late 20s and early 30s—are expected to lift demand for both rental housing and entry-level homeownership across cities, suburbs, and beyond. Meeting this growing and varied demand will require coordinated action by public agencies, private developers, and nonprofit organizations to expand the range of available housing options, McCue said.
June 14, 2017 Realty News Report Copyright 2017