The National Association of Realtors recently reported the nation’s housing inventory hit an all-time low at the end of 2017, prompting the chief economist for Realtor.com to remark this week that "this is the most competitive housing market we’ve seen in recorded history."
Generally positive headlines mask a more mixed picture of the U.S. housing market overall: While privately-owned housing starts reported by the U.S. Census Bureau reached a seasonally adjusted annual rate of 1.3 million in March — up 11 percent year-over-year — all of the gain since February was in the multifamily segment of the market. Single-family starts actually declined nearly 4 percent, to 867,000, and remain roughly 30 percent below the long-run historical average.
The cumulative deficit of new-home starts accrued since 2009 may now be approaching four million. The shortfall is particularly acute at the lower end of the market. New homes priced at $150,000 or less (roughly equivalent to the average price of a state HFA MRB-financed home), which constituted more than one-third of all new home sales 15 years ago, probably account for less than 10 percent of new sales today.
This worsening shortage of starter homes is an often-overlooked driver of the housing affordability crisis. As aspiring first-time buyers are locked out of ownership opportunities — "nationwide more than one in four renters have incomes that put homeownership within reach," reports the Urban Institute — they occupy rental units that could otherwise serve families lacking the income to buy.
A home building industry punching below its weight — due to a "perfect storm" of higher land, labor, material, and regulatory costs — also results in less economic growth that could generate more state and local resources for critical needs, such as affordable housing. Analysis by the Rosen Consulting Group suggests that a U.S. home-building sector fully restored to its normalized level would add $300 billion to GDP, a boost of almost 2 percent.
Notwithstanding the challenging environment, a significant number of state HFAs offer a variety of predevelopment and construction financing products to spur development of new owner-occupied affordable homes; Rhode Island Housing and the Tennessee Housing Development Agency are two leading examples.
And many HFAs provide resources for home repair and rehabilitation, which is essential for maintaining the existing supply of affordable owner-occupied homes. The federal HOME program is a major resource for these kinds of cost-effective investments, having funded more than 240,000 homeowner rehabilitations nationwide, and 1.5 million housing units overall, according to HUD.
As the House and Senate appropriations subcommittees began their work on HUD’s FY 2019 funding bill, NCSHA has ramped up our efforts to secure $1.5 billion for HOME, building on the 43 percent increase we helped deliver in FY 2018.