Home prices have boomed in several major Western markets and declined in dozens of Midwestern and Southern counties
As a whole, the housing market has recovered since the Great Recession, but conditions are somewhat uneven, according to the Joint Center for Housing Studies of Harvard University’s recently released 2017 State of the Nation’s Housing report. Home prices rose 5.6 percent in 2016, reaching a high set nearly 10 years earlier and dropping the number of homeowners underwater on their mortgages to 3.2 million, roughly a quarter of the 2011 peak.
But the recovery is inconsistent, with some parts of the country faring much better than others. While home values increased in 97 of the nation’s 100 largest metro areas, 32 of them are still more than 15 percent away from their pre-recession peak prices. These cities include Chicago, Las Vegas, and Tampa, Fla.
Since 2000, home prices have surged by more than 40 percent in dozens of Western counties, particularly the ones that include Seattle, San Francisco, and Los Angeles. Meanwhile, prices have declined in scores of Midwestern and Southeastern counties, including homes in Detroit, Louisville, and Memphis, during the same time frame.
The price gains are being driven by high demand and tight inventory. While the construction of single-family homes rose 9.4 percent last year to 781,600, according to the report, the U.S. has added less new housing over the last 10 years than during any other 10-year period since the 1970s.
“Any excess housing that may have been built during the boom years has been absorbed, and a stronger supply response is going to be needed to keep pace with demand—particularly for moderately priced homes,” said Chris Herbert, the Joint Center’s managing director, in a statement.
The nation’s homeownership rate is still hovering near a 50-year low at 63.6 percent, as of Q1 2017. The rate isn’t expected to dip any lower, though, as homeownership is picking up. Owner households increased by 280,000 in 2016, the largest increase since 2006.
But housing affordability remains a chief concern. Per the report, which was released Friday, just 45 percent of renters in the nation’s largest metro areas can afford monthly payments on a median-price home in their area. That share drops to 25 percent in some of the pricier markets in the West, Northeast, and Florida.
Renters are having problems saving for a home because they are spending big bucks on rent. More than 11 million renter households spend over half of their incomes on rent, and the number of cost-burdened (paying 30 percent of their income toward housing) renter households is higher than the number of cost-burdened owner households—21 million to 18 million—even though more people are owners.
Despite the concerns about affordability, Millennials are expected to drive demand for both rental and owner-occupied housing, particularly in major cities. Most Baby Boomers, meanwhile, are expected to stay in their current homes and modify them to meet changing needs.