State of the Nation’s Housing Report: Costs Strain Owners and Renters Alike

(Illustration courtesy of the Harvard Joint Center for Housing Studies)

Both homeowners and renters are struggling with high housing costs, the Harvard Joint Center for Housing Studies reported yesterday.

The JCHS State of the Nation’s Housing 2024 report found that millions of potential homebuyers have been priced out of the market by high home prices and interest rates, while the number of renters with cost burdens has reached a record high. But it noted that a surge in new multifamily rental units is slowing rent growth and increasing single-family construction is starting to lift for-sale inventories.

“Still, addressing the country’s housing crisis, including the record number of people experiencing homelessness, the inadequate housing safety net and the growing threat of climate change will require contributions from the private and nonprofit sectors as well as policymakers at all levels of government,” the report said.

Housing Costs Continue to Rise

On the for-sale side, home prices reached a record high in early 2024, rising at an annual rate of 6.4% in February. “With these gains, the U.S. home price index is now a whopping 47% higher than since early 2020,” the report said. “The rise in prices has pushed the median sales price to about five times the median household income.”

In the rental market, rent growth slowed to just 0.2% year-over-year in early 2024, but rents remain up 26% nationwide since early 2020 and are rising in three out of every five markets.

Homeownership Out of Reach

After a brief dip early in the year, interest rates on the 30-year mortgage rose to over 7.0% by mid-April, pushing mortgage costs to 30-year highs for a median-priced home. As a result, first-time homebuying dropped and the homeownership rate inched up to 65.9% in 2023. The higher costs of homebuying have also hampered efforts to reduce racial disparities. As of the first quarter of 2024, the Hispanic (49.9%) and Black (46.6%) homeownership rates are significantly lower than that of white households (74.0%).

“Households of color face other disadvantages, too,” said Daniel McCue, a Senior Research Associate at the Center. “Whether it’s the high downpayment or the monthly mortgage payments, the costs of buying a home have left homeownership out of reach to all but the most advantaged households.”

Cost Burdens Hit Record Highs

In the face of rising housing costs, burden rates are also increasing, the JCHS said. Half of all renter households–22.4 million in total–spent more than 30% of their income on housing and utilities at last measure in 2022, up 2 million since 2019 and the highest number on record. “Rents have been rising faster than incomes for decades,” said Alexander Hermann, a Senior Research Associate at the Center. “However, the pandemic-era rent surge produced an unprecedented affordability crisis that continues.”

The report noted multifamily completions rose by 22% last year to reach the highest annual level in more than three decades. “As these units have come online, they have outnumbered even sizeable increases in new renter households, and so the rental market has cooled slightly,” the JCHS said. “At the same time, vacancies have risen, so have operating costs, straining property owners’ balance sheets.”

Apartment operating expenses increased by 7.1% over the past year, led by a 27.7% nationwide average increase in owners’ insurance premiums. Against this backdrop, net operating income growth fell to 2.8% in the first quarter, down from 8.1% from a year earlier. “The lost revenues, combined with the rising cost of both debt and equity, make new multifamily projects more difficult to finance,” the JCHS said.