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The economy is in its seventh year of expansion. Though slower than normal, it’s been robust enough to create 16 million net jobs since the Great Recession and push the unemployment rate down to a very respectable 4.3 percent. Even an alternative measurement of unemployment, which accounts for discouraged and marginally attached workers, is down to 8.4 percent from 17 percent seven years ago.
Home prices have recovered as well. Quickly rising home values have resulted in a doubling of owners’ equity, from $6 trillion since 2010 to a likely $14 trillion by the end of 2017. While this is great news for homeowners, it’s become a source of frustration for nonowners. whose ranks are rising. Renter households have grown by 20 percent, while homeownership has increased by only 0.3 percent during that period.
This renter pain was a focal point at a June conference hosted by the National Association of REALTORS® at the University of California-Berkeley on what’s needed to get the homeownership rate moving back up in a safe, responsible way. A Texas A&M University economist shared a very promising outlook for the state’s housing market based on area job growth. In California, employment has been just as strong, but the picture was dimmer because of the state’s affordability crisis. The median home price in Silicon Valley hit $1.07 million in the first quarter of the year, doubling from five years ago. Trying to save for a down payment in that environment, as rents keep rising, has to be demoralizing.
The crisis in California could well hit other states, too, reflecting insufficient new-home construction. Consider this disparity: Over the past five years, net job gains totaled 517,000 in the Bay Area and 413,000 in Dallas-Ft. Worth, but developers built only 34,600 new homes in the Bay Area while 120,605 new homes were added in Dallas-Ft. Worth to accommodate all the new workers. The severe effects of lagging residential construction cannot be overstated.
