There are two key housing trends developing amid COVID-19 that I’ve touched on a lot recently that are perhaps worth a closer look. First, here are those trends:
- The market has generally been strong for sellers, perhaps even “booming,” as a result of low interest rates and demand outpacing supply. This has led to home prices rising at a rapid rate.
- These rising prices will exacerbate affordability challenges if supply (particularly lower-cost supply) doesn’t build up to meet the high demand.
These two trends are essentially working against one another — as the average price of a home continues to climb, more and more Americans find themselves unable to make a purchase. I noted earlier this month that for every $1,000 increase to the median home price, nearly 154,000 more households would get squeezed out of the market.
Not surprisingly, fewer Americans are expected to own a home in the future — a report published by the Urban Institute earlier this year projected home ownership to dip to 62 percent by 2040. For comparison’s sake, the rate at the end of 2020 was 65.8 percent, which itself is a bit below the peak from the turn of the century.
This is the end result of a system defined by high demand, low supply and rising prices. Homeownership is “becoming an increasingly exclusive club.” The author of the previous article lists some options to address the issue (loosening credit standards, enacting zoning reform and expanding financial education among them), but nothing is a quick fix. The current market dynamics will take time to shift, if they shift at all.
For those of us in mobility, it’ll be worth keeping an eye on home prices and home ownership rates in the years to come. If finding a home within budget is increasingly difficult, it will be more critical than ever to focus on home-finding support and particularly rental assistance. Because one thing will remain constant: Relocating employees will still need a place to call home.
The homeownership rate will continue to fall for every age group. People who were 25 to 44 years old in 2010 are the most affected age group, as the Great Financial Crisis hindered their ability to become or remain owners. The aging of the US population will cushion the drop in the overall homeownership rate because older households have higher homeownership rates. We project the overall homeownership rate will fall from 65 percent in 2020 to 62 percent by 2040.