House price inflation causing problems for many in the US
By Sober Look
Economists and the markets have been cheering the jump in housing prices and improving construction statistics. But for many Americans rising demand and higher house prices bring more bad news. Based on the latest data (report below) from the Joint Center for Housing Studies, Harvard University (JCHS), here are some sad facts about the housing situation in the US.
1. The number of homes for sale is still near record lows. That is driving up costs and quickly pricing many households out of the market.
2. The US actually has a large number of vacant homes that are not making it into the market. Vacant homes are often in areas with few job opportunities, making it impossible to renovate, sell, or rent. Many are in places like Detroit and simply will never be sold.
3. We are seeing the confluence of tight housing conditions and weak household incomes. As JCHS points out “most types of households have seen their real incomes decline over the past decade”. This is particularly true for growing households.
4. As a result, “the total number of households paying more than half their incomes for housing soared by 6.7 million from 2001 to 2011, a jump of 49 percent”. Note that this is a problem for both homeowners and renters.
5. Housing shortages (discussed here) and rapid renter household growth are driving up rents. At the same time, millions of federal rental subsidies for low income renters are set to expire in the next decade.
6. On top of all this is the fact that households are now forming at a rate of about a million per year. The market is demanding a million new residential units each year. Unless construction can keep up and prices decline or incomes rise (neither seems likely right now), this trend will drive up the number of households with “housing cost burdens” (already over 40 million; see #4 above) – for both homeowners and renters.