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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

Record-Breaking Home Prices and Rents Likely to Cool as Interest Rates Climb: New State of the Nation's Housing Report

After a record-shattering year in 2021, the housing market is at an inflection point. Higher interest rates have taken some heat out of the homebuying market, and the large number of apartments under construction should bring some relief on the rental side. For lower-income households and households of color, though, the pressure of high housing costs is unlikely to relent. According to our new The State of the Nation’s Housing 2022 report, the surge in the prices of gas, food, and other necessities has made matters worse, especially now that most pandemic emergency government supports have ended.

The Soaring Costs of Housing

The costs of housing continue to climb. Home price appreciation nationwide hit 20.6 percent in March 2022, marking the largest jump in three decades, and is continuing to rise. The runup has been widespread, with 67 of the top 100 housing markets experiencing record-high apprecia­tion rates. [INTERACTIVE CHART] Meanwhile, rents were up 12 percent in the first quarter of 2022, with increases in several metro areas exceeding 20 percent. 

High Hurdles for First-Time Homebuyers

With interest rates rising, on top of double-digit home price increases, the income and savings needed to qualify for a home loan have skyrocketed. Potential homebuyers saw monthly mortgage payments on the median-priced US home rise by more than $600 over the past year. At today’s prices, the typical downpayment that a first-time buyer would need for a median-priced home is $27,400, which would rule out 92 percent of rent­ers, whose median savings are just $1,500. [INTERACTIVE CHART]

Increasing Inequalities

The massive windfall from rapid home price appre­ciation has widened the wealth gap between homeowners and renters. In 2019, the median wealth of homeowner households was $254,900—about 40 times the $6,270 median wealth for renter households. Because of their relatively low homeown­ership rates, many Black and Hispanic households missed out on these equity gains. 

Persistent Affordability Challenges

Job and income losses early in the pandemic increased the affordability challenges for millions of households who were already struggling. ­­­In 2020, the share of households paying over a third of their income for housing climbed 1.5 percentage points to 30 per­cent. [INTERACTIVE CHART] This includes a 2.6 percentage point jump in the rate for renters and a 1.0 percentage point increase in the rate for homeowners. The increase among Black households was also disproportionately large at 2.4 percentage points. 

Housing Construction at a New High

Residential construction has finally picked up: single-family starts hit 1.1 million in 2021, exceed­ing the million-unit mark for the first time in 13 years. Multifamily starts were also at a 30-year high, but supply-chain delays have lengthened the time to completion, leaving some 1.64 million homes still under construction in April 2022, which was higher than at any time since 1973. 

The Outlook for Housing

The lessons learned during the pandemic have led to a num­ber of proposals to greatly expand the housing safety net and provide increased support for first-generation homebuyers. While these measures have yet to be implemented, it is impor­tant to continue the policy debate over the best approaches to making housing affordable for all.

The State of the Nation’s Housing 2022 will be released in a live webcast today at 4:00 pm Eastern. Registration required.