In 2015 the national homeownership rate slid. Even though most American people think real estate is a sound financial decision, it comes as great news that single-family and multifamily house construction were up last year. Which is the key when addressing inventory restrictions and affordability problems that keep most people from buying and owning a home.
From the Harvard Joint Center for Housing Studies’ 2016 State of the Nation’s Housing report, stated that in 2015 the U.S. homeownership rate was at about 63.7%, which is down from 69% back in 2004. During that time households, ages 35 to 44 saw a large drop in homeownership levels. By the end of last year, only 58.5% owned property.
Chris Herbert, HJCHS Managing Director, in a press release, said that because of tight mortgage credit restriction, and a decade-long fall in income, lack of jobs and a limited number of homes for sale, it is hard for households, especially first time home buyers to buy a home. And even though the market seems to be improving and reduced the number of owners who are underwater, there is a very large backlog of foreclosure that’s a serious drag on homeownership.
A majority of American people, especially millennials are currently renting and want to be homeowners. A survey from Demand Institute reports that 83% of households expect to own a house one day. While 78% of people believe owning a home is a great investment.
Potential homebuyers are struggling with raised prices and lack of inventory. The national months’ supply of existing homes was about 4.8 at the end of 2015. It was the 4th year the market was down from its normal 6th month supply. The price for an existing single-family home in the US was at $222,400, which is up 6.6% year after year. While new homes increased to $296,400 which is about 4.7%.
Building companies are responding to the buyer’s demands for single-family homes in 2015 with new home starts totaling 715,000, a raise of about 10.5%. Multi-family homes rose to 397,000 which is about 11.8% the highest it’s been since the late 1980s. Also, residential permits increased in about 70 of the 100 largest US metropolitan areas from last year. This includes San Francisco which suffered a notable inventory shortage over a decade long. In the San Jose metro area permit activity has slowed down since 2014.
In 2015 the US added 1.3 million households, this is the largest increase in over a decade. Over the next 10 years or so, it is estimated that millennials will form about 2 million households each year and account for about 40 million households by 2025.
Home builders have a lot of work cut out for them if they want to keep up with current and future demands.