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Housing costs are the top issue plaguing both prospective home buyers and renters, according to Harvard University’s Joint Center for Housing Studies (JCHS).

Millions of potential buyers have been priced out of the market by high home prices and interest rates at the same time the number of renters with cost burdens has hit an all-time high. However, a surge in multifamily rental units is helping to slow rent growth, and increasing single-family construction is starting to lift for-sale inventories, both positive tailwinds for the housing sector and households.

Despite the increase in starts, the State of the Nation’s Housing 2024 report from the JCHS suggests the country’s housing challenges are likely “to become more urgent in the year ahead.”

“Addressing these challenges will not be easy,” said Chris Herbert, managing director of the JCHS. “But with concerted efforts by policymakers at all levels of government, together with the private and nonprofit sectors, we have the ability to increase the supply of quality, affordable homes in thriving communities across the United States.”

Home Prices and Attainability

For-sale home prices reached a new all-time high in early 2024, rising at an annual rate of 6.4% in February. Home price growth was widespread, occurring in 97 of the top 100 markets, with the highest increases in the Northeast and Midwest and more muted growth in the South and West. Accounting for these gains, the U.S. home price index is 47% higher than in early 2020, according to the JCHS.

The rise in prices has pushed the median sales price to about five times the median household income, up from around four times the median household income in 2019.

Additionally, consistently high mortgage rates have caused mortgage costs to reach 30-year highs for a median-priced single-family home. In the first quarter of 2024, a household needed to earn $120,000 annually to afford the median-priced home, up from an inflation-adjusted $82,000 in the first quarter of 2021, according to the JCHS.

“Just a few years ago, we would see multiples of income that someone was paying for their house at two times or maybe three times their income. Today we are seeing [multiples of income] in the mid-4s and for the most affordable buyers the mid-5s,” Sheryl Palmer, chairman and CEO of Taylor Morrison, said in a webinar announcing the results of the State of the Nation’s Housing 2024 report. “That is just not sustainable. We know that new housing has had a distinct advantage given our ability to buy down rates. But it feels like the market has been up to most recently unscathed by the higher rates.”

As a result, first-time home buying dropped and the U.S. homeownership rate inched up 10 basis points to 65.9% in 2023, the smallest increase since 2016. In the first quarter of 2024, the Hispanic (49.9%) and Black (46.6%) homeownership rates are significantly lower than that of white households (74%).

“Households of color face other disadvantages, too,” said Daniel McCue, a senior research associate at the JCHS. “Whether it’s the high down payment or the monthly mortgage payments, the costs of buying a home have left homeownership out of reach to all but the most advantaged households.”

In the rental market, although rent growth slowed to just 0.2% year over year in early 2024, rents remain up 26% nationwide since early 2020 and rising in three out of every five markets. Rent declines were contained mostly to markets in the West and South, though rents in these regions were still significantly higher than pre-pandemic levels by an average of 21% and 28%, respectively.

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