THE BASIS POINT

Cliff’s Notes on giant Harvard housing report

Harvard just put out its giant annual residential real estate report that’s equivalent of the State of the Union address for home buyers, sellers, and renters (aka all of us).

Just about every statistic you might need on real estate is in this report, but scouring can really feel like homework, and since summer just started, I’m doing you a solid by giving you the Cliff’s Notes below.

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CONSTRUCTION AND HOME AFFORDABILITY

– New construction has struggled to keep up with population growth—ratio of homes built to household growth is at historic lows, which is a big reason housing inventory is so low.

– U.S. homeownership rate fell for 12 straight years from 2004-2016, but increased in 2017 and 2018, adding 2.8m homeowners

– Housing affordability problems are concentrated in high-price areas: in metros where median home price is 5x median income, only 1/3 of sold homes are considered affordable.

– In metros were median home price is less than 3x median income, 84% of homes are considered affordable.

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THE STATE OF RENTING

– Rent has increased at a 3.6% annual rate so far in 2019, and rental construction is at a 30-year high with 360k units built last year.

– Number of renters earning at least $75k a year has increased for 8 straight years—4.6 million more since 2010

– There were 4 million fewer apartments renting for less than $800 a month in 2017 than in 2011

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U.S. DEMOGRAPHIC TRENDS

– Millennials and baby boomers are largest generations right now

– Millennials average age 28, two groups of boomers—one group clustered in their 70s and others in mid-50s

– Next few years will see explosion of age 35-44 group as millennials age, adding 2.9 million in next decade

– Two-thirds of growth in this age segment will be households with children, potentially fueling housing demand

– 65+ group will add 11.1 million in next 10 years

– Boomers don’t want to downsize, so will age in place and have to remodel homes for elder care

– Population growth will add 8 million new homeowners by 2028

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HOME OWNERSHIP

– The number of homeowner households increased by 1.6 million in 2017–2018 to 78.2 million

– The number of renters fell by 110,000 to 43.2 million in the same time frame

– Biggest increase in homeownership rate in households under 35 years old

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Reference:

The State Of The Nation’s Housing (Harvard Joint Center For Housing Studies)