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Jun 30, 2017

Harvard Report Reveals Housing Construction Comeback

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Roughly a decade after the onset of the Great Depression, new home construction nationally is showing signs of life again, with more than 1.1 million units being built last year.

But it’s a tale of two different recoveries, according to a report just released by the Joint Center for Housing Studies of Harvard University called The State of the Nation’s Housing 2017.

“Multi-family construction turned around much more quickly and strongly after the recession,” says Daniel McCue, a senior research associate at the center, “in fact, multi-family construction has been accelerating for several years now.”

But single-family building has, for the most part, remained stubbornly sluggish: “It’s been slower, after the hit it took in the housing bust,” says McCue.

In fact, not until last year, for the first time in a decade, did single-family housing starts finally outpace multi-family building, charting a 9.4 percent jump.

Conversely this also meant that new multifamily construction slightly declined in 2016, although McCue notes “We didn’t want to make too much of that because the levels are still historically high and they are still strong numbers—it just couldn’t stay as hot as it has been in previous years.”

While industry analysts like the overall upward trend in home building, the larger picture remains challenging.

According to Christopher Herbert, the Harvard center’s managing director, the overall industry has still failed to return to its pre-recession figures.

Noting that home building is up “the seventh year in a row,” Herbert adds that “we are now at a level where the housing starts are a little under 1.2 million—back in previous recessions that would have been near the bottom of the recession.”

Speaking during a housing conference sponsored by the National League of Cities, Herbert added: “If we look back over the last ten years, we’ve added nine million units to the housing stock.”

“That’s the lowest ever for a ten-year period,” continues Herbert. “If you look at what was typically done in the post-war period, it’s about fourteen to fifteen million housing units, so we’ve been adding a lot less housing over the last ten years.”

This means, only naturally, a tight supply of both houses that are for sale and for rent, and an increasing demand for new housing.

The Harvard report also explores the potent role that demographics is playing in the housing market, with the share of Millennials living with their elders at a historic high of 35.6 percent, and Baby Boomers still continuing to represent a massive chunk of the nation’s homeowners.

“The Baby Boomers, as they turn 65 years and older, are going to increase the number of older American households to unprecedented levels,” says McCue, “and the demand there will be in modifying housing stock.”

This means, explains McCue, an increased demand for “renovating and adjusting the housing stock for the needs of an aging population.”

“And that will also involve modifications for accessibility features,” notes McCue.

Millennials, meanwhile, will continue to represent a growing factor in the market, increasing their presence as the head of households from roughly 16 million to nearly 50 million in the next two decades.

“The need for a starter unit, a first home of modest size or apartment for a small family,” among the Millennials will only increase, says McCue, but so will the demand among Baby Boomers for “smaller units to downsize in.”

This means a portion of new homebuilding in years to come will be geared for a unique crossover demand among both Baby Boomer and Millennials home buyers.

Increasingly, aging Baby Boomers want to live in walkable communities where they don’t have to drive, “and that’s an expressed desire among young adults, too,” adds McCue.   

 

By Garry Boulard

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