AUSTIN – The nation’s housing market may show a slight uptick this year, but for millions of Americans spanning the great gulf of home affordability will remain impossible, according to opening day speakers at the 2024 ULI Housing Opportunity Conference.
“Everyone here in here knows we have an affordable housing crisis. Freddie Mac said we has a shortage of four million homes and that was back in 2020. The problem is still here today,” said Daryl Fairweather, chief economist of realty firm Redfin at the opening session of the conference, which was held Tuesday, February 20, in Austin.
The pandemic era of low mortgages rates is gone leaving homebuyers to contend with 30-year mortgage rates well over 6 percent, Fairweather told the ULI conference.
That means the typical family faces higher home prices, higher down payments and higher mortgage rates that push home buying out of reach.
Currently for the typical American house, buyers earning the national median income must spend 41 percent of their household income to be able to afford the median priced home at today’s mortgage rates.
“Now that interest rates are up again, affordability is even in a worse place than it was before the pandemic,” Fairweather said.
Changing demographics also change the housing landscape. Millennials are now the largest cohort in today’s world and the oldest of the Generation Z group is turning 30 and contemplating the homebuying challenge. The affordability hurdle often appears so high that buyers give up.
“We have changing preferences where the American Dream of home ownership is not really an attainable dream anymore. People are starting to look at renting as a long-term solution,” Fairweather said.
The demographic evolution also impacts supply.
Many people in the large Baby Boomer population—the oldest Boomer turns 78 this year—have paid off their mortgages or refinanced when they could lock-in a 3 percent mortgage a few years ago. Ironically, empty-nester Boomers own about 28 percent of the nation’s three-bedroom homes.
Notably, two in five Baby Boomers have lived in their homes for more than 20 years.
“Millennials and GenZers have a long way to go in catch up to the home ownership rate of older generations,” Fairweather said.
The year ahead will not be transformational, said Fairweather.
“We had a low record number of home sales last year. We had a record unaffordability of homes because of high interest rates and high prices,” she said. “This year it’s going to be slightly a little better in terms of homes sales and affordability, hopefully. But it’s not going to be a lot better.”
Supply, a great pressure valve in home affordability, has still nor advanced to the point of meeting demand for homes.
Multifamily construction has been strong in parts of the nation.
But in many markets, such as Austin, the multifamily units in the construction pipeline will come to a “cliff” in 2026 when building goes into dark retreat, said Dana Schoewe, principal of the RCLCO Real Estate Consulting firm.
Austin had booming sales and skyrocketing prices as tech firms and the Tesla electric vehicle company bought thousands of people to the city in recent years.
Housing construction has been strong in Austin, “But it’s still not enough,” said Schoewe. Affordability is not attainable for many in the Texas capital city. Demand still outstrips supply.
The ULI’s Terwilliger Center Home Attainability Index is produced in conjunction with RCLCO to produce deep data on home affordability.
In opening remarks, Ron Terwilliger of the ULI Center for Housing said providing attainable housing is a challenge in the world today. Many millions are underhoused, causing pain to families around the world.
“I personally believe housing is a human right,” said, Terwilliger, chairman emeritus of Trammell Crow Residential Co.
