Study Assesses Housing Markets Amid Post-Pandemic Recovery

Harvard University’s Joint Center for Housing Studies recently released its annual “State of the Nation’s Housing 2021” report. You can download the report at www.jchs.harvard.edu/state-nations-housing-2021. Each year, the report summarizes the housing market and challenges faced by renters and homeowners. This year, the report finds soaring home prices, a tight housing supply, and millions facing risk of eviction or foreclosure.

As 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. At the same time, millions who lost income are behind on housing payments and on the brink of eviction or foreclosure. And according to the report, a disproportionately large share of at-risk households are those with low incomes and people of color.

Surging Home Prices, Tight Supply

Sales of existing homes were up 20 percent year over year on average from September 2020 through February 2021. Historically low interest rates and rapidly rising prices have in turn given a substantial boost to new residential construction.

The home-buying demand occurred despite historically tight supply; in late 2020, the months of supply for existing homes dipped below two months for the first time ever, while the median time on the market hit a record low of 18 days. According to the Housing Vacancy Survey, the national homeownership rate stood at 65.6 percent in the first quarter of 2021, a 0.3 percentage point increase from a year earlier.

Racial Inequities in Homeownership

The report notes that while the national homeownership rate is trending upward, the pandemic amplified disparities between households of color and white households. In the first quarter of 2021, the persons of color–white homeownership gap was 28.1 percent, an improvement from the record high of 30.8 percent in 2019 but still large by historical standards. In addition, income inequality contributes to the disparities in homeownership, with the median income of white households ($71,000) approximately 65 percent higher than Black households ($43,000), and nearly 30 percent higher than Hispanic ($55,000) households.

Risk of Eviction and Foreclosure

The report found that, as a result of widespread income losses during the pandemic, 14 percent of all renter households were behind on their housing payments in early 2021, and in 10 states, more than one-fifth of renters were in arrears.

The report notes most of the 7.1 million loans that entered forbearance had left that status as of March 2021. However, some 2.3 million homeowners were still in active forbearance in early 2021. Homeowners in these circumstances were more likely to be households of color and/or have little equity in their homes. A recent report by the Consumer Financial Protection Bureau found that 9.2 percent of Black and 8.4 percent of Hispanic mortgage holders were in forbearance in March 2021, considerably higher than the 3.7 percent share of white mortgage holders.

Rising Number of Cost-Burdened Households

Housing affordability remains an acute challenge for lowest-income renters. According to the report, more than 80 percent of renters earning less than $25,000 were cost burdened or spending over 30 percent of their income for housing in 2019 and the majority spent more than half their income on housing.

And while housing subsidies offer much-needed support, only a quarter of eligible households receive assistance. And the assistance doesn’t begin to address long-standing housing affordability issues. “Housing cost burdens have also moved up the income ladder,” says Alexander Hermann, a Senior Research Analyst at the Center. “Seventy percent of renter households earning between $25,000 and $34,999 and nearly 50 percent of renters earning between $35,000 and $49,999 were cost burdened in 2019.”