JCHS gives its take on soaring home prices and tight supply

With the U.S. economy continues to recover from the effects of the pandemic, households that weathered the crisis without financial distress are snapping up the limited supply of homes for sale, pushing up prices and further excluding less affluent buyers from homeownership. 

But millions who lost income are behind on housing payments and on the brink of eviction or foreclosure. 

According to The State of the Nation’s Housing 2021 from the Joint Center for Housing Studies of Harvard University (JCHS), a disproportionately large share of at-risk households are those with low incomes and people of color. 

While policymakers have taken bold steps to prop up consumers and the economy, additional government support will be necessary to ensure that all households benefit from the expanding economy.

Even before the pandemic, household growth in the suburbs and small metros was on the rise. The pandemic helped accelerate this growth, particularly among younger households who were ready to own homes, and were looking for more space to work remotely, the JCHS reports. 

In 2020, existing-home sales rose 6% and new single-family home sales jumped 20%, putting total home sales at their highest level since 2006. 

The homebuying binge occurred despite historically tight supply; in late 2020, months of supply for existing homes dipped below 2 months for the first time ever, while median time on the market hit a record low of 18 days. 

The combination of robust demand and limited supply lifted home prices to their fastest pace in over a decade. The largest price gains were in rapidly growing Western states, led by a 28 percent jump in Boise and 22%–23% increases in Austin and Tacoma. 

Additionally, home price gains continued to outrun income growth last year, lifting the national price-to-income ratio to its highest level since 2006. 

“These outsized increases have raised concerns that a home price bubble is emerging,” says Daniel McCue, a senior research associate at the JCHS. “But conditions today are quite different from the early 2000s, particularly in terms of credit availability. The current climb in prices instead reflects strong demand amid tight supply, aided by record-low interest rates.”

The full report from the JCHS is available here.