August 12, 2014

Hot August Nights and an Even Hotter Housing Market


By Jamie Howsley

Summer 2014

I really love history.  Last summer I spent part of my summer vacation in Virginia touring Jamestown, Yorktown, and Colonial Williamsburg.  This year I had the pleasure of spending my summer vacation in Cape Cod, Massachusetts.  I spent one day in Plymouth and saw “the rock” and a replica of the Mayflower.  What struck me most about my visits wasn’t the age of these towns (some settled in 1620), but the number of houses for sale along the Cape.  Was this a historical anomaly or a migration pattern?  It made me wonder about the status of the national housing market and where the recovery is compared with historical norms. 


Harvard’s Joint Center for Housing Studies' annual housing report, released at the end of June, contains a tremendous amount of data.  Chief among them remains the housing market section, which focuses on the recovery of home construction.  In 2013 U.S. home construction starts in both multi-family and single-family totaled 925,000, up from 781,000 the year before.  This represents an 18 percent increase but is still well below the historical average of 1,460,000 per year.  2013 represents the sixth consecutive year that housing starts failed to overcome the 1,000,000 mark. 


The study identified about one-third, or 310,000 units, intended for the multi-family market.  This is the highest percentage of new housing dedicated to rentals since tracking of this data began in 1974.  However, one should not read too much into this as it is a reflection of the weak single-family market nationwide rather than a huge production of multi-family units.


It appears from the data that the West is in better shape than most parts of the country.  The data also suggests that while there are still a lot of millennial-aged people, the number of people in their 30s living with their parents is dwindling, which suggests household formation is strong.  


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