Washington, D.C.—Housing demand remains strong amid tight supply, a tight credit market and low interest rates, while major urban areas experience higher-than-average vacancy rates and declines in rent as renters shift to suburban markets, according to the National Association of Home Builders (NAHB).
Spikes in home prices will challenge housing affordability moving forward, according to the NAHB. The market’s historically low supply, which dropped below two months for the first time ever, will need to catch up for the market to moderate.
“I don’t think we’re in a bubble,” noted Chris Herbert, JCHS managing director, during the report’s livestream release. The factors contributing to the current rise in housing prices is substantially different from the rise seen before the Great Recession, he added, which was fueled in large part by a less stringent lending market.
“The Joint Center for Housing Studies 2021 report confirms NAHB’s overview of the housing market over the past few years,” said Rob Dietz, NAHB chief economist. “The housing market lacks supply, and residential construction has been challenged by a number of issues such as regulatory burdens, building material availability, land/lot access and a skilled labor shortage.”
Rising home prices are likely to continue as supply remains low, due in part to sharply rising material costs. This will continue to price people out of the market, particularly people of color. The report notes that neighborhoods in which minorities comprise more than half the population saw price increases on average of 14.3%—3.5 percentage points higher than the average for metro areas overall.
“The best solution to tame recent unsustainable gains in home prices, and to similarly ease rent burdens is more supply: more single-family and multifamily construction and more remodeling of the existing housing stock,” Dietz added.