Harvard’s Joint Center for Housing Study Releases Important Data
With numerous housing reports coming out each month, many have debated what these new economic performance measurements will mean for the future of housing rates and for the building industry. According to Harvard’s The State of the Nation’s Housing 2016 report, new home sales are strengthening with a 6.39% increase to 5.3 million. Although these numbers may indicate that the housing economy is not back to where it once was, it does show that there is substantial improvement from recent years.
Impact of Interest Rates on Housing
As interest rates fluctuate, the housing market often experiences shifts. Lower rates tend to increase affordability, prompting more buyers to enter. Conversely, higher rates can dampen demand by raising monthly mortgage costs. In recent years, slight changes in interest rates have impacted homebuyers’ purchasing power and have influenced the pace of sales across various regions.
Major report findings:
- Multifamily starts rose 11.8% to 397,300, the highest in 27 years. Single-family starts were also up, rising 10.5% to 715,000.
- Sales of both new and existing homes are up. The existing homes inventory remains tight with a supply of 4.8 months.
- The inventories of for-sale homes in the low and middle price tiers dropped 9% between 2014 and 2015, contributing to a total decline of 38% between 2010 and 2015.
- The median price of existing homes rose 6.6% to $222,400. Rising home prices have contributed to a reduction in the number of homeowners with negative equity.
However, other issues have risen, specifically the cost burden for renters. According to the report, 36.4% of households in 2015 opted to rent, which is the highest numbers seen since the late 1960s. This stems from low-income rates, as well as millennials who still are deeply in debt with school. Millennials show a distinct preference for urban living, favoring locations with convenient access to work and lifestyle amenities. This has increased the market demand in cities, often leading to higher property values in urban centers and surrounding areas. Many millennials say that they envision themselves purchasing a home of their own one day, but due to financial troubles do not see themselves buying a home in the near future.
The report also shows that US housing starts have risen more than expected in June due to construction activity. Advances in construction technology have reshaped the industry. Modular housing techniques have streamlined building processes, reducing time and costs significantly. Additionally, green building practices have become more widespread, contributing to sustainability and energy efficiency in new developments. These trends have influenced both the design and pace of new housing projects. Despite the rise in housing starts, data points show that there will be a leaner second quarter, especially with it being an election year. While we are still far away from a boom period in housing, the latest housing starts from Harvard’s Joint Center for Housing Study shows that we are on a gradual recovery path.
Key Takeaways:
- Americans remain optimistic toward homeownership
- Household growth is on the rise
- Rental housing remains in high demand
- New construction of single-family homes is on the rise
While the numbers show a gradual recovery, there’s still a lot of situations in which the housing economy may not reach the housing peak that it once was. Although, with those numbers being as unstable as they were, it’s possible that they may not be such a bad thing.
