State of the Nation’s Housing: Harvard’s Good News for the Rental Market

Have you seen The State of the Nation’s Housing 2012 yet? Published by the Joint Center for Housing Studies at Harvard, the study clocks in at 40 pages–not really coffee table reading! But it has some great data about the rental housing and multifamily markets, as well as some conclusions about the housing market as a whole. We’ve pulled some of the best quotes from the study for you–let’s dive in, shall we?

“…Stronger sales should pave the way for a pickup in single-family construction over the course of 2012; nevertheless, a number of conditions may keep the recovery in the owner-occupied market relatively subdued.”

The study starts with the lay of the land, looking at the for-sale housing market of 2011–when housing prices continued to drop and construction of new single-family homes was at an all-time low. The end of 2011 and the beginning of 2012 has shown signs that the owner-occupied market will begin to pick up, as prices hit bottom and consumer confidence climbs.

However, the market for single-family homes is unlikely to skyrocket, or even to make more than modest gains, this year–that’s due to a backlog of homes in foreclosure, as well as the 11.1 million homeowners who are currently underwater on their mortgages. So let’s move right on over to the post-Great Recession’s housing market golden child: the rental market.

“The bright spot continues to be the rental market…indeed, the number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the postwar era.”

Where have these staggering increases come from–who exactly is renting in 2012? One facet of the boom is the fact that there are greater numbers of young, minority, and lower-income households forming; but they’re not the only ones renting these days. There has also been quite a bit of movement from owning to the rental model from middle-aged white married people with moderate incomes, partially due to the high incidence of foreclosures during the recession.

So that’s how the rental culture began–but these days, increasing numbers of people are renting not out of fear, but because it suits their lifestyle and their needs. And according to Harvard, a whole new generation of renters is about to hit the market…

“Rental markets have yet to benefit fully from the presence of the large echo-boom generation.” 

Ah, the echo-boomers. If you’re a parent, you may have one or two living in your basement right now! Once upon a time, if you were fortunate enough to go to college, when you graduated, you were probably able to get a job; from there, housing–whether renting or buying–would fall into place. But the recession changed all of that, and many echo-boomers have had to embrace moving back in with their families upon graduating, as they commence the lengthy search for work.

Renting is generally most common at or under age 25, and due to this delay, new household formation under age 25 has been dampened considerably. But no one can live at home forever; the economy is strengthening, there are more jobs out there, and the echo-boomers will soon be striking out on their own. When they do, rest assured they’ll want to rent their homes for awhile yet. But enough about echo-boomers; let’s talk property values.

“Rental market tightening has stabilized multifamily property values after a sharp drop rivaling that in the single-family market.”

Remember 2009? Those were tough times for property values–even for multifamily housing. Luckily, it’s a bit of a distant memory these days, thanks to the ever-rising rents and falling vacancies of today’s rental market, which have buoyed multifamily property values and sent them back on their way up. According to the NCREIF, 2011 Q4 prices rose 10% over a year earlier; that’s 34.4% up compared to the 2009 low.

Meanwhile, multifamily housing starts “more than doubled from the trough to a 225,000 unit annual rate” early this year.  We’ve still got a bit of a ways to go before we hit the 340,000 yearly pre-recession average, but it looks like things are well on their way back to normal–or even better than.


That’s it from us today, but there’s plenty more–40 pages worth!–of good info in the report. Check it out here, or for lighter reading, check out the article covering the study in this month’s issue of Units.


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