For many of these renters, these apartments are probably their first after school. Paying rent and associated bills every month is new to them, so buying condos or townhouses might be a culture shock. Yet a recent study from the Lusk Center for Real Estate at the University of Southern California suggests that many other young people have seen how the recession took an ax to their parents' equity and investments and prefer to wait until things settle down before buying.
It may take a while for this to happen, according to the Joint Center for Housing Studies at Harvard University. Its annual gauge of the housing market and its prospects was not encouraging.
The vigor of housing's recovery hinges on a return of demand, the joint center's report said. But the lingering consequences of the recession and financial crisis are thwarting a broader recovery.
"While the sharp declines in both home prices and interest rates have left homes in many places more affordable than they have been in decades," said Eric S. Belsky, managing director of the joint center, "stubbornly high unemployment and tightened lending standards have limited the ability of many first-time buyers to capitalize on the situation."
"The state of the nation's housing is sobering," Belsky said. "Total housing construction over the previous decade now barely exceeds the lowest level of any 10-year period in records dating back to 1974, but vacancies remain elevated because the recession has driven demand down so sharply."
The only sunny spot? You guessed it: It's the rental apartment market.
"Rental housing markets are tightening and may begin to lead a modest recovery in housing construction this year," said center research director Chris Herbert.
The projected growth in younger as well as older households in the next 10 years likely will continue to increase demand for rental housing "as well as for smaller homes," Herbert said.
Baby boomers will add 8.7 million households to the 65-and-older bracket by 2020. Most aging boomers will remain in their present homes, but current mobility rates suggest 3.8 million could downsize, increasing demand for smaller houses.
There is, of course, a downside to growth in demand for rental housing: affordability, an issue that exists even when the housing market is booming.
Tightening rental markets will exacerbate housing-affordability problems for renters, especially those with low incomes, Herbert said.
The last decade saw a surge in burdens among both renters and owners that left a record 19 million American households paying more than half their income for housing, according to the latest available data, collected in 2009.
Overall, these cost burdens are climbing the income ladder, to affect more moderate- and middle-income households, the center reported.
In fact, rates of severe-cost burden among households making between $45,000 and $60,000 per year, which is roughly three to four times times the minimum wage, doubled between 2001 and 2009, the report stated.
Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.com or @alheavens at Twitter.
