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Newsweek
24-06-2025
- Business
- Newsweek
Harvard's Housing Market Study Flags Worrying Trends—'Shocking'
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The housing affordability crisis that has been keeping the dream of homeownership out of reach for millions of Americans over the past few years is unlikely to ease "anytime soon," according to a new report by the Joint Center for Housing Studies of Harvard University. The State of the Nation's Housing 2025 found that sky-high home prices—which are still rising at the national level—historically elevated mortgage rates, and rising home insurance premiums and property taxes are still keeping Americans on the sidelines of the market, despite growing inventory. The result is that sales are falling across the country as many Americans cannot afford to buy a property. While experts believe these dynamics will bring down home prices by the end of the year, Harvard researchers said, "The increasing possibility of an economic downturn threatens to deepen these challenges." Challenges Still Facing Homeowners in 2025 Home Prices As of early 2025, U.S. home prices were 60 percent higher than they were in 2019, before the pandemic homebuying frenzy spurred by historically low mortgage rates began. The prices were not only significantly higher than before the health emergency but were also still rising at a rate of 3.9 percent year over year, according to the Harvard study. In 2024, the median price of an existing single-family home hit a new high of $412,500. As of May 2025, according to the latest Redfin data, it was $441,738, up 1 percent from a year earlier. A construction worker carrying lumber at a site where a new home is being built in a neighborhood destroyed by a wildfire in Pacific Palisades, California, on May 7. A construction worker carrying lumber at a site where a new home is being built in a neighborhood destroyed by a wildfire in Pacific Palisades, California, on May 7."This is a shocking five times the median household income," Daniel McCue, a senior research associate at the Joint Center for Housing Studies, said in a news release. "This is also significantly above the price-to-income ratio of 3 that has traditionally been considered affordable." While prices have continued rising this year, existing-home sales dropped to a new 30-year low of 4.06 million, the study found. Rising Property Taxes and Home Insurance Premiums It isn't only sky-high home prices that are keeping prospective buyers off the market. The cost of homeownership has increased dramatically over the past few years as property tax bills have risen as a result of skyrocketing home values, and home insurance premiums have climbed following the increased frequency and severity of natural disasters across the country. Home insurance premiums jumped 57 percent from 2019 to 2024, according to the Harvard study, "with the sharpest increases in areas with the greatest risk of a climate-related disaster." Property taxes also climbed nationwide by an average of 12 percent between 2021 and 2023. Consequently, a growing number of Americans homeowners are cost-burdened, meaning they spend more than 30 percent of their income on housing costs. In 2023, according to the Harvard study, the number of cost-burdened homeowners rose by 646,000 to 20.3 million, representing 24 percent of all homeowner households. Mortgage Rates Historically high mortgage rates are also discouraging buyers from making a purchase this year. Last year, according to the Harvard study, monthly mortgage payments on a median-priced home for first-time buyers with a 30-year loan rose to $2,570. That is 40 percent higher than it was in 1990, requiring buyers to earn an annual income of at least $126,700 to afford a home and the associated taxes and insurance costs, researchers found. "Only 6 million of the nation's nearly 46 million renters can meet this benchmark," Alexander Hermann, a senior research associate at the Harvard center, said in a news release. The situation is unlikely to change this year or the next. As of June 18, the nationwide average 30-year fixed-rate mortgage was 6.81 percent, according to Freddie Mac, more than three times higher than the lows reached during the pandemic. Experts believe mortgage rates will keep hovering between the 6 percent and 7 percent marks throughout 2025 and 2026. The Number of Americans Reaching Homeownership Has Shrunk With the long-standing affordability issues weighing on prospective buyers, the number of Americans who can realize their dream of homeownership is shrinking. Last year, the U.S. homeownership rate fell for the first time in eight years, down 0.3 percentage points to 65.6 percent. The rate has continued falling in the first quarter of 2025, sliding to 65.1 percent. The situation is even more dire among first-time homebuyers. The homeownership rate dropped by 1.4 percentage points in 2024 for households under the age of 35 and by 0.8 percentage points to 61.8 percent for households aged 35 to 44, according to the Harvard study. In the same year, homeownership rates for households aged 45 and above remained relatively unchanged. An Uncertain Future The future of the U.S. housing market is "inextricably linked" to that of the country's economy and federal policy, Harvard researchers said, adding, "As such, much of its future is uncertain." President Donald Trump's tariffs on the U.S.'s trading partners, many of which affect crucial construction material, are bound to bring up the cost of building a home, builders and experts have said. The cost of building materials went up by 36 percent between February 2020 and February 2025, the Harvard study found, and it is likely to continue surging in the coming months. Estimates show that the Trump administration's tariffs may add $12,800 to $25,500 to the cost of building a new single-family home. Homebuilders surveyed by the National Association of Home Builders said they expected tariffs to push up new home prices by $10,900. Trump's aggressive stance against illegal migration could also exacerbate labor shortages in the construction sector, further increasing the cost of homebuilding. About one-third of construction workers are foreign-born, the Harvard study found—about twice the rate of the overall labor force. On top of these issues, reductions in federal staff and funding threaten to exacerbate an already-unprecedented housing crisis, the study concluded. "There must be a concerted effort to do more to address the affordability and supply crises," Chris Herbert, the managing director of the Harvard center, said in a news release. "The potential consequences of inaction are simply too harmful to the macroeconomy and the millions of households striving for a safe, affordable place to call home."
Fast Company
24-06-2025
- Business
- Fast Company
The American starter home is shrinking
In 2024, for the third straight year, the median size of a new single-family home in the U.S. has shrunk, to 2,150 square feet. That's down from nearly 2,500 square feet back in 2013, and startlingly close to the roughly 2,100 square foot average seen in 2009 at the depth of the global financial crisis. It's a downsizing that underscores just how hard it is for most people to afford to buy a home today, and the extent to which homebuilders are adjusting their offerings to meet demand. This telling figure comes from The State of the Nation's Housing, an annual report just released by Harvard University's Joint Center for Housing Studies. The report finds that affordability challenges are reshaping the housing market, right down to the square footage. 'Homebuilders are able to make adjustments to meet demand where it is, and what it's showing is that there's demand for lower-cost units,' says Daniel McCue, a senior research associate at the Joint Center for Housing Studies. 'Buyers look like they're willing to buy slightly smaller homes in order to be able to afford them, given that prices have risen so high over the past three, four, five years, and interest rates remain relatively high as well.' Since 2019, average home prices have risen more than 60%, according to the report. Historically, that average has been skewed by the cost of new homes, which tended to be more expensive than existing homes. But that gap is narrowing. In the 2010s, the typical new single-family home was about $66,000 more expensive than the median sales price of an existing home, McCue says. In 2024, the typical new home cost only about $8,000 more. 'I take that as a reaction to the lack of inventory and the tightness of existing housing sales markets,' McCue says. Part of this price drop has been engineered by homebuilders themselves. McCue says many builders are trying to help buyers by offering more favorable interest rates and interest-rate buydowns through their own mortgage companies. 'They're able to make some adjustments, and in doing so, we're seeing the price points of new homes coming down to make those sales happen,' McCue says. In addition to reducing the size of U.S. homes, these efforts have had some impact. New home sales in 2024 were up about 3% over 2023, and existing home sales have dropped to a 30-year low. '[Homebuilders] have been able to kind of buck the trend by making these hard-fought gains in affordability,' McCue says. But with interest rates hovering above 6% and a general sense of economic uncertainty tied to the Trump Administration's trade policies, whether sales of new homes will continue to rise is unclear. 'One of the themes looking forward is how much of these adjustments, and how much of these hard-fought gains will be upended by rising costs due to tariffs,' he says. Another way the shape of housing is changing is in growing numbers of townhomes on the market. The report found that in 2024, builders started 176,000 townhomes, a 59% increase compared to 2019. 'It's one example of the way in which buyers and builders are focusing on products that are relatively more affordable, given the affordability constraints,' McCue says. Those constraints don't look to be going away any time soon, and that's created a separate but connected boom in the housing market. According to the report, about 93,000 single-family rental homes were started in 2024, which is the highest number on record and more than double the 40,000 rental units started in 2019. As homeownership gets farther and farther out of reach for many Americans, homebuilders appear ready to build rental homes they can afford.
Boston Globe
14-05-2025
- Business
- Boston Globe
If so many people are leaving Massachusetts, why aren't housing costs going down?
Nearly everyone agrees that perhaps the biggest threat to Massachusetts' economy is that But if so many people are moving away, why don't housing prices go down? The state's combination of slow population growth and sky-high prices would seem to contradict the basic laws of supply and demand. Related : The simplest explanation is this: Even if people leave the state, Massachusetts is so short on homes that There is no true estimate of exactly how many homes Massachusetts needs to meet demand right now, because different economists have different ways of measuring these things. Advertisement So researchers tend to defer to the most obvious indicator: the 'There is no one perfect measure of the housing shortage,' said Daniel McCue, a senior research associate at Harvard's Joint Center for Housing Studies. 'The easiest thing to look at is the housing market and the way prices are growing here. That is indicative of extreme demand that the state isn't meeting.' One recent example: In many parts of the country, home prices have modestly dipped over the last two years due to rising interest rates. Not here. Statewide, Advertisement That alone, said McCue, is enough of an indicator that the state needs to build more, much more. And then there's the broader picture of the state's population trends. Related : Much of under President Trump. But immigration has driven population growth here for some time. Domestic migration was negative well before COVID — every year going back to 2014 — while international immigration has been positive. Then there are births in the state, which have outpaced deaths here for years, though that growth has slowed recently. So while people are leaving the Massachusetts, the population is still growing. And on top of the number of people who live in the state is the number of households they form. That number is also expected to grow over the next ten years, said McCue. Related : Advertisement Someone forms a new household when they move into a new living arrangement. The simplest example of this is when a young person moves out of their parents' home, and what was one household becomes two. Household growth has surged in the US in recent years — driven mostly by Millennials — and the same has been true in Massachusetts. Between 2025 and 2035, the state figures some 500,000 Millennial and Gen Z residents will form new households here, exceeding the pace at which Baby Boomer and other older households shrink or move away. A condo development under construction in Jamaica Plain. Jessica Rinaldi/Globe Staff The easiest way to think of that dynamic and how it impacts the housing market in Massachusetts is like this: Picture a couple who raised two children in a Boston suburb. Eventually, those children will move out on their own, forming new households of their own that require housing. Most won't find any place to live in the town they grow up, unless that town has built new housing. At the same time, their parents will still be living in the house they grew up in, now with empty bedrooms, because there are so few smaller options. What this dynamic means is that the number of people who need housing in Massachusetts will keep growing, even if the overall population does not. Those are the new households the Healey administration accounted for when it called on the state to build 222,000 new homes between 2025 and 2035. The researchers who helped create that recommendation assumed zero population growth; if they're wrong, of course, the state will need even more. Advertisement One somewhat common refrain is that population loss wouldn't be such a bad thing for Massachusetts, because it could lower housing costs. Why is it such a bad thing if the kids move away from the town they grew up in, or even out of the state, if it means demand for new homes will go down? The answer, said McCue, is that those kids are future workers, who power the state's companies and economy. If they leave, good jobs will follow. Housing costs would drop because of a downturn in the state's economy marked by job loss, companies leaving the state, and a generally weaker Massachusetts. 'That is not a scenario that anyone should be rooting for,' said McCue. 'States with healthy economies don't shrink.' Andrew Brinker can be reached at
