The high cost of housing is making it increasingly difficult for many Americans to make ends meet, with monthly rents rising faster than wages. This concerning trend is highlighted in a new housing report from Harvard University, released in June by the Joint Centers for Housing Studies of Harvard University. The annual report paints a grim picture of the current housing market, noting that affordable housing deals are increasingly scarce.
Daniel McCue, the senior researcher for the Harvard University Housing Report, emphasized that home prices are exceptionally steep and that the supply of affordable housing is insufficient. “Middle and lower-income renters are seeing a shortage. We’ve lost over 6 million low-rent units over the past 10 years,” McCue said. This loss has exacerbated the already challenging landscape for many renters.
The report’s lead author pointed out that many homeowners are effectively trapped in their current homes because they can’t afford to move, even if they want to. Rachel Burkholder, a teacher from the Denver suburbs, shared her personal struggles with the housing market. Burkholder has been looking for a bigger home to accommodate her family but has found it increasingly difficult to save for a new home due to inflation. “It’s been daunting because, like everything else, it’s going up,” she said. “I feel like everything that you purchase at the store now has gone up substantially, so learning how to budget better has been a challenge.”
Higher interest rates and rising property taxes are major contributors to the high cost of housing, according to the report. Daryl Fairweather, the chief economist at Redfin, noted that housing costs are rising across almost every part of the country. “First it was the south that was getting more expensive, we saw a boom and a bust in places like Austin, but even the Midwest and the Northeast are now seeing rapid price growth, in home prices and in rents,” Fairweather said.
The report also highlights the financial strain that housing costs are placing on Americans. A significant portion of homeowners and renters are spending more than the recommended 30 percent of their income on housing. Specifically, one in four homeowners are exceeding this threshold, and almost half of all renters are in the same situation. This financial strain is making it harder for individuals and families to manage their budgets and save for the future.
Given the current state of the housing market, experts suggest that those who can afford to buy a home should consider doing so now, despite the high costs. Burkholder echoed this sentiment, acknowledging that purchasing a home now would require sacrifices but might be a strategic move given the lack of competition in the market. “Going into this, knowing that there’s going to be some sacrifices we are going to make as a family. But also knowing that there’s some wiggle room especially looking now when there’s not as much competition,” she said.
Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Until then, the high cost of housing is likely to continue to be a significant challenge for many Americans, impacting their ability to manage other financial obligations and maintain a stable standard of living.
In conclusion, the Harvard University housing report underscores the urgent need for increased affordable housing supply and strategic economic policies to address the rising costs that are squeezing both homeowners and renters across the country. As the housing market remains volatile, the financial strain on American households is a pressing issue that requires immediate attention and action from policymakers and stakeholders.