There are several challenges facing the
housing industry today, including rising interest rates, home prices rising by
a double-digit percentage, and an imbalance between supply and demand for
multifamily housing units.
In its report for 2021, Harvard's Joint
Center for Housing Studies (JCHS) claims that the housing market is at a point
of inflection, following a record-breaking year in 2021. There is a need to
reduce housing costs for low-income households and households of color;
according to the JCHS report "The State of the Nation's Housing
2022," it is unlikely to relent on reducing housing costs for lower-income
households and households of color.
Todd Tomalak, principal of building
products at Zonda, says there are some issues facing housing: household
formation is strong, but property prices fluctuate with unprecedented
consequences. First-time homebuyers are being priced out due to rising costs of
building products and rising mortgage rates. Due to increasing rents, those
without homes gain significant home equity gains, and renters facing surging
rents experience a greater wealth gap."
Although costs and interest rates are high,
the JCHS says that low unemployment, favorable demographic shifts, and strong
wage growth positively impact housing demand in the near term. JCHS reports
that a record number of homes will be completed in the next few months,
indicating that supply chain delays are decreasing. While housing demand will
depend on fiscal policymakers' ability to cool inflation without causing a
recession, the report notes that these factors are directly linked to the
ability to cool inflation.
As well as high building materials, land
prices, and a labor shortage, affordable homes pose a long-standing challenge,
according to Chris Herbert, JCHS managing director. Many proposals have been
made to improve the housing safety net and provide more fantastic support to
first-generation homeowners following the pandemic. It's important to continue
discussing policy alternatives to make housing affordable for everyone, even
though these measures haven't been implemented."
Soaring Housing Costs
While the housing market is forecast to
grow in the near term, housing costs are continuing to rise, according to the
JCHS. The increase in home prices in March was 20.6%, the most significant rise
in the past three decades. A record-high appreciation rate is ongoing in 66 out
of 100 of the country's top 100 housing markets. According to the U.S. Census
Bureau, a new record for existing home sale prices hit 5.3 times the median
household income in 2021, a record height well above the previous peak of 4.9
in 2005.
Several metros saw increases exceeding 20%
in the first quarter of 2022, with rents rising 12%. According to the JCHS, the
rent for professionally managed housing increased 11.6% in 2021, and the rent
for single-family housing increased 12.4% year over year (YOY) in the first
quarter of 2022. 116 out of 150 analyzed metro markets had double-digit rent
growth in the first quarter of 2022, while 25 had rents that exceeded 20% in
the first quarter of 2022.
One of the reasons for the rise in
single-family housing is that households who can work remotely have a greater
need for more living space than ever," says Daniel McCue, a senior
research associate at the JCHS. As a result, investors have sought out
moderately priced properties to either convert to rentals or upgrade them to
resell.
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buying land for sale in Alabama or your first home.