Tight home market has big effects across US

A diminished supply of available homes is swelling prices in large U.S. metro areas from New York to Miami to Los Angeles, squeezing out would-be buyers and pushing up rents as more people are forced to remain tenants.

The trend is pressuring Americans’ budgets, with about one-third of households spending more than 30 percent of their gross income on housing, according to a recent report by Harvard University’s Joint Center for Housing Studies.

Homeownership rates have stagnated in part because high rents have made it difficult for many prospective buyers to amass a down payment for a house.

At the same time, the sparse supply of available properties is benefiting current homeowners, many of whom have home values that recovered from the housing bust a decade ago.

The tight supply of homes and a shortage of affordable rental housing have improved little in recent years for a variety of reasons. Among the key factors is that construction has yet to regain the pace of homebuilding that predated the bust.

“As the economy continues to recover, as income picks up, as household formations pick up, it’s not spurring a supply response,” said Chris

Herbert, managing director of Harvard’s Joint Center for Housing Studies.

Some major findings in the report:

Housing affordability

The government considers people who spend over 30 percent of their income on housing to be “cost-burdened.”

About one-third of households — 38.9 million — were considered such in 2015, down from 39.8 million a year earlier. Roughly 16 percent of households, or about 18.8 million, paid more than half of their income on housing.

The share of renters paying more than they can afford varies. In Miami, it’s 35.4 percent. In El Paso, Texas, it’s just 18.4 percent. Other cities where households were deemed to be cost-burdened include Daytona Beach, Florida, and Honolulu.

In the Columbus area, about 72,000 renters,

or 23.4 percent of households that rent, pay at least half of their income on housing. In other Ohio cities: 24.2 percent in Cleveland; 23.8 percent in Cincinnati; 23.5 percent in Dayton; 23 percent in Akron; 24.9 percent in Toledo; and 21.7 percent in Youngstown.

Ryan Welch, 32, of Santa Monica, California, pays about $1,500 a month for a rent-controlled one-bedroom apartment he shares with his wife.

Welch, who works in advertising sales, would like a bigger place with more amenities. But he’s reluctant to leave his apartment.

“I’m nervous to move to a place that’s not rent-controlled,” he said.

Saving for a home has had to take a back seat to payments on student loans and his car.

Widening cost gap

One striking finding in the Harvard report is the gap in home values that’s widened since 2000, well before the

market hit its boom-era highs. When adjusted for inflation, prices in markets along the East and West coasts have vaulted more than 40 percent since 2000. By contrast, values in the Midwest and South have declined.

Among the markets where prices remain well below their housing-boom peaks: Las Vegas, Chicago, Detroit and Tampa, Florida. By contrast, home values have risen far above their previous highs in Denver, San Francisco and Austin, among other markets.

“If you go back to, say, 1970 and you look at the differences in house prices across market areas, they were not nearly as extreme as they are now,” Herbert said. “It’s a function of income inequality and how much the differences in income have grown.”

Home supply & prices

The availability of homes for sale has fallen short of demand. Last year, the typical new home for sale was on the market for just 3.3 months, according to the report — well below the average of 5.1 months dating to the 1980s. So far this year in the Columbus area, homes were listed an average of just 43 days before selling.

All told, 1.65 million homes were on the market in the U.S. last year, the fewest in 16 years.

The supply is worse for lower-priced homes that typical first-time buyers could afford.

Between 2004 and 2015, construction of single-family homes of less than 1,800 square feet fell to 136,000 from nearly 500,000, according to the report.

The trends helped boost national home prices 5.6 percent last year, above their housing boom peak. (Prices remained nearly 15 percent below their peak, when adjusted for inflation.)