The Harvard Joint Center for Housing Studies recently released its The State of the Nation’s Housing 2021 report.
To coincide with the release, the Center held a webinar on June 16 to discuss the report’s findings.
It featured a panel discussion between Gary Acosta, co-founder and CEO, National Association of Hispanic Real Estate Professionals; Clarence Anthony, CEO and executive director, National League of Cities; Chris Herbert, managing director, Harvard Joint Center for Housing Studies; and Erika Poethig, special assistant to the President for Housing and Urban Policy, The White House Domestic Policy Council; with Washington Post reporter Tracy Jan serving as moderator.
The organization has been releasing this report annually for more than 30 years, “so it’s chronicled a number of unusual and challenging times—perhaps none more so than this past year,” Herbert said.
“The story of this year’s State of the Nation’s Housing Report begins with the for-sale housing markets, which are red hot,” according to Daniel McCue, a senior research associate at the Center and one of the lead authors of the report.
According to the report, home sales bounced back quickly from a mid-2020 pause.
The report said that following a 26% drop in May, sales of existing homes were up 20% year over year on average from September 2020 through February 2021.
According to the National Association of Realtors, there were 1.03 million existing homes on the market in February 2021.
Household growth in the suburbs and small metros was on the rise even before the pandemic, which helped accelerate this growth, particularly among younger households who were ready to own homes and were looking for more space to work remotely, it says in the report.
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 report states.
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, according to the report.
Home prices rose 13.2% nationally in March 2021 and by at least 10% in 85 of 100 large metro areas and divisions in the first quarter of 2021, the report says.
“These outsized increases have raised concerns that a home price bubble is emerging,” McCue said. “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.”
New residential construction, like home sales, rebounded quickly last summer and continued at a strong pace through early 2021, according to the report.
Housing starts climbed 6.9% last year to 1.38 million units—the highest output since 2006 when production reached 1.8 million units, the report says.
Completions were also up 2.5% to 1.29 million units, while permitting rose 6.1% to 1.47 million units, the report states.
According to the report, for the first time in three years, single-family construction drove the increase in production in 2020.
Starts of single-family homes jumped to 991,000 units—a 12% gain for the year and the biggest percentage increase since 2013, the report says.
This is likely due to more young and first-time homebuyers entering the market, which increased the demand for smaller, more affordable homes, the Center noted in its report.
Multifamily housing construction dipped 3% last year, to 389,100 units, according to the report.
From June 2020 through March 2021, total starts averaged just over 1.5 million units at a seasonally adjusted annual rate, in line with the Joint Center’s housing demand projections calling for production of 1.5 million units annually in 2018–2028, the report says.
The Center pointed out that the cost and availability of labor is yet another issue for homebuilders.
The average hourly wage in the construction industry increased by 2.8% in March 2021 from a year earlier, to $32.25 per hour, the report shows.
The number of job openings in construction fell sharply on a 12-month rolling basis from 309,000 in early 2020 to 268,000 in early 2021 but remained about twice the 130,000 openings averaged from 2000 to 2016, the report finds. According to Anthony, 35% of the construction industry relies on both Latino and immigrant population, according to Anthony. About 50% of that Latino population is immigrants, he added.
According to the report, the top concerns among homebuilders in 2020 were the scarcity and cost of building materials.
The price of inputs to new residential construction overall rose by 14% year-over-year in March 2021, the report says.
The surge in softwood lumber prices went up 83% over the same period and the jump in lumber costs added about $36,000 to the average price of a new single-family home, per the report, citing recent analysis from the National Association of Home Builders.
The report also noted that the cost other materials rose as well—gypsum was up 6%, while concrete rose 2%.
To read the full report, click here.