What defines the American housing market, circa 2018? Let’s see: a lack of available homes for rent and sale, rising prices due to that lack of supply, and diminishing affordability, particularly for low-income Americans and first-time buyers.
Sound familiar? The biggest difference between this year and the previous one is that these problems have only gotten worse, according to “The State of the Nation’s Housing 2018,” a comprehensive annual report produced by the Joint Center for Housing Studies of Harvard University.
“We have high shares of owners and renters paying high shares of their incomes on housing,” says Daniel McCue, a senior research associate who helped write the report.
So what’s new? These three trends have received less than their fair share of media attention.
No. 1: Immigrants to increase demand for housing
President Donald Trump‘s hard-line stance on immigration is expected to slow the numbers of foreigners entering the U.S. and buying homes. But the Harvard center still predicts about 1 million immigrants a year will settle in the country.
Immigrants are expected to “increasingly drive household growth,” according to the report. That’s partly because many U.S.-born millennials are delaying getting married and having children.
By contrast, immigrant households more than doubled from 7.7 million in 1990 to 17.8 million in 2016, according to the U.S. Census Bureau. They made up about 20% of renters and 12% of homeowners.
“Over time, the number of households formed by native-born Americans has slowed ever since the baby boomers,” says McCue. “Meanwhile, immigration has rebounded and been on the rise.”
That’s been a boon for the housing market, particularly during the recession. They helped to stabilize struggling areas that suffered big job losses during the recession. But it can make things harder for locals looking for bargain-basement prices.
“Because they are driving population and household growth, immigrants have also helped push home prices up—a benefit for existing owners and a challenge for those hoping to become homeowners,” says Chief Economist Danielle Hale of realtor.com®.
No. 2: Millennials are expected to stay put
Fewer people are trading up or down or making big moves—especially millennials. Just 24% of 20- to 24-year-olds picked up and moved in 2017. That’s down from 34% for that age group in 1996. The mobility rate dropped 3 percentage points for those aged 30 to 34, and it dipped 1 percentage point for those 65 and up.
One possible reason is that as housing prices and student debt soar, more young adults are forced to live with their parents. This prevents the parents from putting their homes on the market and downsizing into smaller ones.
Overall, just 11% of folks moved into a new home in 2017—compared with 12% in 2012 and 13% in 2007.
“Reduced mobility means less dynamism and churn in the housing market for both rentals and owner-occupied properties,” says Hale. “Low housing vacancy rates and high home and rent prices coupled with this lack of dynamism means even if younger adults were interested in moving, they likely face fewer available living options.”
However, the number of folks moving out of their state—nearly 27,000—has been fairly constant over the past decade. The only places that are seeing hordes of new residents moving in are the West and the Southeast, including Washington, Oregon, Florida, Georgia, and South Carolina.
Millennials, in particular, headed to Colorado, Georgia, Maine, Minnesota, New Hampshire, Oregon, Texas, and Washington.
“These are areas that are more attractive to these younger people,” McCue says. “It could be where the jobs are and the quality of life that they’re looking for is.”
The Western region is appealing to many because there are many high-paying jobs in those areas. Meanwhile, growing industries and a much lower cost of living is drawing more folks down South.
Expensive states such as California, New York, and Illinois saw the most residents say goodbye due to the high costs of housing and living.
No. 3: Black homeownership rates are lagging behind
Black Americans are increasingly getting left behind when it comes to homeownership rates. There’s a hefty gap between the rates of homeownership for blacks compared with whites—29.2 percentage points, according to the report. And the gap is widening. In 1983, the difference was 23.5 percentage points.
Since 1994, black homeownership has risen only 0.3%, according to the report. Over the same time period, it’s gone up 2.2% for white Americans.
The gap between white and Hispanic homeownership rates is 26.1 percentage points. Between whites and Asians there’s a gap of 16.5 percentage points.
“With the housing downturn, we saw minorities have a steeper decline in homeownership,” McCue says. “In general, minority households were more likely to have just entered homeownership and had less home equity to help them to withstand the downturn.”
Some of this is because the black community was hit so hard by the foreclosure crisis a decade ago. That’s because many black Americans were targets of these subprime mortgages that led to the housing bust.
Another reason is the income gap. The median household income for blacks was $39,000 in 2016—40% below the $65,000 median income for whites. Hispanic households made a median $47,800, about 27% less than whites.
The post The State of the Nation’s Housing in 2018: The 3 Biggest Takeaways appeared first on Real Estate News & Insights | realtor.com®.
Source: Housing Trends Feed