Our Awkward Housing Recovery
By several metrics, 2012 looks like the year when America's housing recovery finally got well under way. Last year, existing home sales took off at their fastest pace since 2007. New home sales grew by 20 percent from their historic low in 2011. By April of this year, home prices were up year-over-year in just about every corner of the country. Things had improved in the previous 12 months in all but two states, and in 94 of the 100 metro areas tracked by the analytics firm CoreLogic.
Between March of 2012 and March of this year, the national median home price was up 11.6 percent. New construction of rental and multi-unit housing in particular had taken off, driven by the increase of 1.1 million new renter households in 2012. "With these increases," writes Harvard's Joint Center for Housing Studies in its annual report on The State of the Nation's Housing [PDF], "residential construction made its first positive contribution to GDP in seven years, adding more than a quarter-point to economic growth."
Source: JCHS tabulations of CoreLogic®, Home Price Index. From "State of the Nation's Housing 2013."
All sounds good, right? Simultaneous to these positive developments, however, a disturbing decade-long trend has also taken root: Thanks in part to widening inequality, the number of households in America struggling to afford housing at all is at an all-time high. According to American Community Survey data from 2011, 42.3 million households (or 37 percent of all households) paid more than 30 percent of their pre-tax income on housing. That year, 20.6 million households paid more than half their income.
That latter group – those households defined as having a "severe" housing burden – nearly doubled between 2001 and 2011, with their ranks swelling over the decade by 6.7 million households.
Source: JCHS tabulations of US Census Bureau, American Community Surveys.
As this group has gotten bigger, the stock of housing it can afford has shrunk. Between 2007 and 2011, the number of housing units available to extremely low-income households (those making less than 30 percent of the median area income) has dropped by 135,000. Households earning one full-time minimum wage can afford to pay about $400 a month in rent. Between 2001 and 2011, according to the Harvard report, 650,000 rental units available at that price permanently disappeared from the housing stock.
As for new rental units coming onto the market? The typical unit completed in 2012 rents for $1,100 per month.
The housing recovery, in short, isn't doing much for any of these people. And the federal housing assistance programs specifically designed to help many of them are now eroding as well under budget cuts. This means that while the housing market appears to be improving on the whole, it is simultaneously getting uglier for millions of people.