After a Record 2021, Housing Markets Reach an Inflection Point
June 27, 2022
On June 22, Harvard's Joint Center for Housing Studies (JCHS) released its State of the Nation's Housing Report for 2022. The report highlighted the soaring costs of housing in both the ownership and rental markets. Home price appreciation nationwide hit 20.6% in March 2022, topping the previous high of 20.0 percent in August 2021 and marking the most significant jump in three decades of recordkeeping. At the same time, rents for apartments in professionally managed properties were up 12% nationally in the first quarter of 2022 from a year earlier, with increases in several metro areas exceeding 20%.
While housing markets are likely to remain tight in the near term, the steep rise in interest rates has cooled homebuyer demand and should give inventories a chance to rebuild and help slow the pace of price growth. On the rental side, demand should remain brisk given the large number of adults now in their 20s, 30s, and 40s that continue to form new households at a rapid clip. The tight conditions on the supply side are expected to ease somewhat given the record number of new units now under construction.
The JCHS report also highlighted the growing affordability challenges nationwide. With inflation resulting in soaring prices for everyday necessities, household budgets have become increasingly strained, especially among lower-income households and households of color. An immediate concern highlighted by the JCHS is the risk of an economic downturn or recession as a result of tightening monetary policy, which would further exacerbate the affordability crisis the country is facing.
The report stressed the need for more moderate-priced housing and expanded support for the lowest-income households. "Developing the policies and practices to meet this need will take concerted efforts by both the public and private sectors," the authors noted. "The Biden Administration's Housing Supply Action Plan makes a good start with a blueprint for reducing the severe shortfall in affordable housing."