The Joint Center for Housing Studies of Havard University released its 2016 The State of the Nation’s Housing report that delves into a number of important housing issues, namely the lack of affordable housing, income inequality, concentrated poverty and the continuing decline in homeownership rates.
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According to the report, new home sales are strengthening with a 14.6 percent increase to 501,000 in 2015. Existing-home sales are blazing with a 6.3 percent increase to 5.3 million, which could lead some to believe the housing crisis is over.
But in the study’s accompanying live webcast, moderator and CNBC journalist Diana Olick was quick to point out the crisis is improving — but not yet over.
Income inequality and rising cost of living
To back up her statement, Olick pointed to The National Association of Realtors’ latest existing-home sales report that boasted the highest existing-home sales since February 2007, and the highest median home sales price ($239,700) since last year’s peak of $236,300 in June.
This marks the 51st consecutive month of year-over-year gains.
According to the JCHS panel, the ever-rising median home sales price is only the tip of the iceberg when it comes the current issues plaguing the housing market.
“This report highlights the issue of income inequality. People’s incomes are not keeping up the costs of taking care of themselves and their families,” said Mayor Setti Warren of Newton, Massachusetts.
Although the report notes real median incomes are rising annually by 1.0 percent for all workers 15 and over (up 2.3 percent for individuals aged 24 to 34 and up 4.1 percent for those aged 35 to 44) those income increases are failing to keep up with the rising cost of living that includes things such as student loan debt and other debt repayments.
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Millennials, who are often looked to as the next wave of buyers that will lift us out of homeownership slump, are deciding to move back in with parents due to crushing student loan debt.
According to JCHS study, the average student loan balance rose from $10,500 in 2001 to $17,000 in 2013. Moreover, 39 percent of households aged 20 to 39 in 2013 had outstanding student loan debt.
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As incomes increase, the rate of income equality grows as well, which is keeping homeownership out of reach for many.
From 1980 to 2014, the average real income of households in the bottom decile fell 18 percent to $6,300, while top-decile incomes rose an astonishing 66 percent to $256,000.
Furthermore, 20 million American households had a net worth of $1,000 or less, and 43 million had a net worth of $25,000 or less — up from 30 million in 1992.
The pressures of debt and income equality on many Americans is reflected in the 5 percentage point decrease in homeownership from the 69.0 percent peak in 2004.
The largest drop has been in the 35 to 44 year-old-demographic (which is simultaneously experiencing the biggest income increase) — their homeownership rates dropped 11 percentage points to 58.5 percent.
Homeowners and would-be homeowners aren’t the only ones feeling the burn.
In 2014, there were only 31 affordable and available rental units for every 100 extremely low-income renters (incomes at or below 30 percent of area median) and 57 units available for low-income renters (incomes at or below 50 percent of area median).
Even those who are not considered extremely low income or low income are impacted. As of 2014, the number of cost-burdened renters (who spend more than 30 percent of income on housing) hit a record high of 21.3 million.
‘A willingness to act’
When discussing this issue, Lennar Corporation CEO Stuart Miller pointed out, “It’s not financially feasible to build at the lower end” due to zoning restrictions and rising land costs. But the panel agreed that something must be done since 36.4 percent of households in 2015 opted to rent — the highest numbers seen since the late 1960s.
“The problem isn’t that we don’t have solutions. The problem is that we’re not funding the solutions to the scale needed to fix the problem,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition.
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Each panelist suggested state and local entities and voters ban together to create housing solutions for their communities as well as push presidential candidates to directly address housing issues.
“All it takes is awareness and willingness [to act],” said Yentel.
Get the full list of the study’s key facts here. Read the full study here.
