JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY

THE STATE OF THE  

NATION’S HOUSING

2016

 

HARVARD GRADUATE SCHOOL OF DESIGN

HARVARD KENNEDY SCHOOL

Principal funding for this report was provided by the Ford Foundation  

and the Policy Advisory Board of the Joint Center for Housing Studies.  

Additional support was provided by:

Federal Home Loan Banks

Housing Assistance Council

MBA’s Research Institute for Housing America

National Association of Home Builders

National Association of Housing and Redevelopment Officials (NAHRO)

National Association of REALTORS

®

National Council of State Housing Agencies

National Housing Conference

National Housing Endowment

National Low Income Housing Coalition

National Multifamily Housing Council

© 2016 by the President and Fellows of Harvard College.

The opinions expressed in The State of the Nation’s Housing 2016 do not necessarily  
represent the views of Harvard University, the Policy Advisory Board of the Joint Center  
for Housing Studies, the Ford Foundation, or the other sponsoring organizations.

JOINT CENTER FOR HOUSING STUDIES  
OF HARVARD UNIVERSITY

CONTENTS

Executive Summary 

1

Housing Markets 

7

Demographic Drivers 

13

Homeownership 19

Rental Housing 

25

Housing Challenges 

31

Appendix Tables 

37

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

1

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HOUSING RECOVERY SCORECARD

By many measures, the US housing market has recovered sub-
stantially from the crash. According to CoreLogic estimates, 
nominal home prices were back within 6 percent of their previ-
ous peak in early 2016, although still down nearly 20 percent in 
real terms. The uptick in nominal prices helped to reduce the 
number of homeowners underwater on their mortgages from 
12.1 million at the end of 2011 to 4.3 million at the end of 2015. 
Delinquency rates also receded, with the share of loans entering 
foreclosure down sharply as well.

But at 1.1 million units, new home construction was still run-
ning near historic lows last year. A key factor holding back 
housing starts is the sustained falloff in household growth. 
Given the size and age of the adult population and under nor-
mal economic conditions, roughly 1.2 million net new households 
would have formed on average each year in 2007–2013. But 
the actual increase was just half that number as the weak 
economy made it difficult for young adults to live on their own 
and for immigrants to settle in the United States. In 2015, how-
ever, with the economy nearing full employment and incomes 
beginning to climb, household growth returned to its expect-
ed pace and new home construction was up by a healthy 

 

11 percent (Figure 1). 

Now in its seventh year, the US economic recovery shows signs 
of flagging in the face of a strong dollar, a weakening global 
economy, and low energy prices. But as household growth 
continues to gain momentum, the housing sector should be an 
engine of growth. Factoring in the need to replace older units 
and meet demand for vacation homes and other uses, housing 
construction should average at least 1.6 million units a year 
over the next decade. This level of activity would provide an 
important spur to the economy. Indeed, residential fixed invest-
ment (including homeowner improvements) has accounted for 
just 2.8 percent of annual GDP so far this decade, significantly 
less than the 4.3 percent share averaged in the 1980s and 1990s, 
leaving plenty of room for growth. 

With household growth finally 

picking up, housing should help 

boost the economy. Although 

homeownership rates are still 

falling, the bottom may be in 

sight as the lingering effects 

of the housing crash continue 

to dissipate. Meanwhile, rental 

demand is driving the housing 

recovery, and tight markets 

have added to already pressing 

affordability challenges. Local 

governments are working to 

develop new revenue sources to 

expand the affordable housing 

supply, but without greater 

federal assistance, these efforts 

will fall far short of need.

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2

HOMEOWNERSHIP DOWN BUT NOT OUT

The US homeownership rate has tumbled to its lowest level in 
nearly a half-century. The decade-long declines are especially 
large among the age groups in the prime first-time homebuying 
years

 

(Figure 2).

 The falloff in homeownership has more than 

offset earlier gains, leaving age-specific rates for all but the old-
est households significantly lower than in 1995. 

But a closer look at the forces driving this trend suggests that 
the weakness in homeownership should moderate over the 
next few years. A critical but often overlooked factor is the role 
of foreclosures in depleting the ranks of homeowners. Indeed, 
CoreLogic estimates that more than 9.4 million homes (the 
majority owner-occupied) were forfeited through foreclosures, 
short sales, and deeds-in-lieu of foreclosure from the start of 
the housing crash in 2007 through 2015. 

Although completed forfeitures have slowed considerably, they 
remain elevated at 670,000 or about twice the annual average 
before the downturn. In addition, Mortgage Bankers Association 
(MBA) data indicate that the share of loans that are seriously 
delinquent (90 or more days past due or in foreclosure) has also 
fallen sharply, but is still nearly double the average in the first 
half of the 2000s. Given the current rate of recovery, foreclo-
sures are likely to keep downward pressure on homeownership 
rates for the next two years.

Just as exits from homeownership have been high, transitions to 
owning have been low. Tight mortgage credit is one explanation, 
with essentially no home purchase loans made to applicants 
with subprime credit scores (below 620) since 2010 and a sharp 
retreat in lending to applicants with scores of 620–660 compared 
with the early 2000s. And given that the homeownership rate 
tends to move in tandem with incomes, the 18 percent drop in 
real incomes among 25–34 year olds and the 9 percent decline 
among 35–44 year olds between 2000 and 2014 no doubt played 
a part as well.

  

Household Growth     

  

Housing Starts

2.25

2.00

1.75

1.50

1.25

1.00

0.75

0.50

0.25

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Housing Construction Has Picked Up in Line 
with Household Growth

Millions

 

FIGURE 1

Source: US Census Bureau, Housing Vacancy Surveys and New Residential Construction data.

Source: US Census Bureau, Housing Vacancy Surveys.

 

 

1995   

 

 

2005   

 

 

2015

90

80

70

60

50

40

30

20

10

0

25–29

30–34

35–39

40–44

45–49

50–54

55–59

60–64

65–69

70–74

75 and Over

Homeownership Rates for Most Age Groups Have Fallen Well Below Pre-Boom Levels

Homeownership Rate (Percent)

FIGURE 2

Age Group

Age Group

3

J O I N T   C E N T E R   FO R   H O U S I N G   S T U D I E S   O F   H A R VA R D   U N I V E R S I T Y

The good news for the owner-occupied housing market is that 
these constraints should ease as the mortgage market continues 
to wrestle with the fallout from the housing crash and adapts to a 
new regulatory environment. There are already indications from 
the Federal Reserve’s Senior Loan Officer Opinion Survey that 
credit standards may be loosening, particularly for loans backed 
by the government-sponsored enterprises (GSEs). The upturn in 
real income growth among younger households should also help. 

Other structural shifts, however, could also have an impact on 
homeownership rates—in particular, the rising tide of student loan 
debt. The share of adults aged 20–39 with student loan debt soared 
from 22 percent in 2001 to 39 percent in 2013, while the average 
amount that borrowers owed jumped from $17,000 to $30,000 
in real terms. Although student loan payments should not limit 
the homeownership options of most households, this may not be 
true for the nearly one-fifth of indebted young renters whose pay-
ments exceed 14 percent of monthly income, a level the Consumer 
Financial Protection Bureau considers highly burdensome. 

Several long-term demographic forces are also at work. Ages at 
first marriage and the start of childbearing have been on the rise 
for some time, implying delays in first-time homebuying. The 
growing minority share of the population also has a dampening 
effect, given minorities’ much lower homeownership rates. At the 
same time, though, the aging of the baby-boom generation (born 
1946–1964) is increasing the share of households over 50, the ages 
when homeowning is most common. On net, these countervailing 
trends are unlikely to move the homeownership rate much.

The bigger question is whether the housing crash diminished the 
general appeal of homeownership. The available evidence sug-
gests that it has not. For example, a 2015 Demand Institute survey 
of more than 5,000 households found that 89 percent of respon-
dents under the age of 30 owned a home, would buy a home on 
their next move, or would buy a home in the future. The shares 
of respondents with similar responses exceeded 80 percent in all 
other age groups as well. In addition, 63 percent of all respondents 
to the April 2016 Fannie Mae National Housing Survey also stated 
that they would buy homes on their next move.

In short, the near-term direction of the US homeownership rate 
will depend more on whether households can finance their pur-
chases than whether they have the desire to own. Over the next 
few years, homeownership will continue to face the headwinds 
created by a backlog of homes in foreclosure, tight credit, weak 
income growth, and impaired credit histories. But as these pres-
sures ease, there is every reason to expect homeownership rates 
to show some increase.

RENTAL MARKET STRENGTH 

The rental market continues to drive the housing recovery, with 
over 36 percent of US households opting to rent in 2015—the 
largest share since the late 1960s. Indeed, the number of renters 
increased by 9 million over the past decade, the largest 10-year 
gain on record. Rental demand has risen across all age groups, 
income levels, and household types, with large increases among 
older renters and families with children.

Notes: Rents are from the CPI rent index for primary residence. Changes in vacancy rates are based on a four-quarter trailing average.
Source: JCHS tabulations of US Bureau of Labor Statistics, Consumer Price Indexes and Census Bureau, Housing Vacancy Surveys.

 

 

Rent Index (Left scale)     

 

 

Vacancy Rate (Right scale) 

5

4

3

2

1

0

-1

-2

-3

-4

-5

1.25

1.00

0.75

0.50

0.25

0.00

-0.25

-0.50

-0.75

-1.00

-1.25

2004

2000

2002

2001

2006

2008

2011

2010

2003

2005

2007

2009

2013

2015

2016

2012

2014

Vacancy Rates Have Fallen for Five Full Years, Pushing Up Rents 

Year-over-Year Change (Percent)

FIGURE 3

Year-over-Year Change (Percentage points)

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4

Although conversion of formerly owner-occupied single-
family homes to rentals met much of the initial surge in 
demand, construction of multifamily units is now taking 
on a growing share. But even with these additions to sup-
ply, rental vacancy rates have fallen steadily since 2010, 
dropping to just 7.1 percent by the end of 2015. Rents have 
climbed in response, with the Consumer Price Index for 
rent on primary residences up 3.6 percent in nominal terms 
last year (Figure 3).

 

When adjusted for inflation, it has been 

three decades since either of these measures registered such 
tightness in the rental market.

A growing supply of new housing in the pipeline may help 
ease these conditions, although most new units are intended 
for the upper end of the market. The median asking rent on 
new apartments was $1,381 per month in 2015, well out of 
reach for the typical renter earning $35,000 a year. High rents 
reflect several market conditions, including a limited supply 
of land zoned for multifamily use and a complex approval 
process that adds to development costs. Perhaps most 
important, however, is growing demand from higher-income 
households.

Concerns are increasing that multifamily property valuations 
in some markets may be overinflated. The strong financial 
performance of rental properties and the relatively low yields 
from competing investments have driven up demand, pushing 
the Moody’s/RCA price index for investment-grade properties 39 
percent above the previous high. Capitalization rates are now 
below levels at the height of the housing boom. Valuations are 
particularly high in the New York metro area, where property 
values were 93 percent above their previous peak in the fourth 
quarter of 2015, and in San Francisco, where they were 85 per-
cent above peak. 

COST-BURDENED RENTERS AT HISTORIC HIGHS

The divergence between the rental and owner-occupied mar-
kets is evident in the number of cost-burdened households in 
each segment. On the owner side, the number of households 
facing cost burdens (paying more than 30 percent of income 
for housing) has fallen steadily as high foreclosure rates have 
pushed out many financially strained owners, low interest rates 
have allowed remaining owners to reduce their housing costs, 
and fewer young households have moved into homeownership. 
As of 2014, the number of cost-burdened owners stood at 18.5 
million, down 4.4 million since 2008. 

The decline has occurred across all age groups, but especially 
among younger homeowners. Homeowners age 75 and over, 
however, are among the most cost-burdened groups, with their 
share at 29 percent compared with 24 percent for households 
under age 45. With the aging baby boomers swelling the ranks 
of older homeowners and larger shares of households carrying 
mortgage debt into retirement, the problem of housing cost 
burdens among the elderly is likely to grow. 

On the renter side, the number of cost-burdened households 
rose by 3.6 million from 2008 to 2014, to 21.3 million. Even more 
troubling, the number with severe burdens (paying more than 
50 percent of income for housing) jumped by 2.1 million to a 
record 11.4 million. The severely burdened share among the 
nation’s 9.6 million lowest-income renters (earning less than 
$15,000) is particularly high at 72 percent. In all but a small 
share of markets, at least half of lowest-income renters have 
severe housing cost burdens (Figure 4). While nearly universal 
among lowest-income households, cost burdens are rapidly 
spreading among moderate-income households as well, espe-
cially in higher-cost coastal markets.

HOUSING ASSISTANCE STRUGGLING TO KEEP UP 

Most federal housing assistance is targeted to very low-income 
households (earning 50 percent or less of area median). Some 
18.5 million renters met this criterion at last count in 2013, up 
2.6 million since 2007. Meanwhile, the number of renters receiv-
ing some form of assistance from the US Department of Housing 

Notes: Severely cost-burdened households pay more than 50% of income for housing. Data are for core based statistical areas (CBSAs).
Source: JCHS tabulations US Census Bureau, 2014 American Community Survey 1-Year Estimates. 

 

 

25–49   

 

 

50–59   

 

 

60–69   

 

 

70–79   

 

 

80–99

In Most of the Country, a Large Majority of 
Lowest-Income Renters Are Severely Cost Burdened

FIGURE 4

Share of Renters with Incomes Under $15,000 with Severe Burdens (Percent)

5

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and Urban Development (HUD) actually fell by 159,000 from 2007 
to 2013, with a loss of project-based units more than offsetting 
an increase in housing vouchers. 

Only one in four income-eligible renters receives assistance of 
any kind, leaving millions to try to find housing they can afford in 
the private market. But units affordable to lowest-income house-
holds are often already occupied by higher-income households. 
Indeed, the National Low Income Housing Coalition estimates 
that only 57 units were affordable and available for every 100 
very low-income renters in 2014. The shortfall for extremely low-
income households (earning 30 percent or less of area median) is 
even more acute, with just 31 housing units affordable and avail-
able for every 100 of these renters. 

The lack of a strong federal response to the affordability crisis 
has put new pressure on state and local governments to act. A 
number of cities have now developed plans to expand afford-
able housing options for a broad spectrum of renters, from 
those facing homelessness up to middle-income households. 
In addition to federal funds, these plans draw on a range of 
resources that include linkage fees on new commercial devel-
opment, tax-increment financing, taxes on real estate transac-
tions, and the use of publicly owned land. 

Another increasingly common approach is the adoption or 
expansion of inclusionary zoning ordinances, either mandating 

that a share of new units have below-market-rate rents or offer-
ing the opportunity for higher development densities in exchange 
for affordable set-asides. But cities can only go so far on their 
own. Recent estimates from the Lincoln Institute of Land Policy 
show that inclusionary housing programs produced just 129,000–
150,000 affordable units nationwide from the 1970s through 
2010, making a strong federal support system still essential. 

CONSEQUENCES OF HIGH-COST HOUSING 

The lack of affordable housing options forces cost-burdened 
renters to sacrifice other basic needs, settle for inadequate liv-
ing conditions, and/or face housing instability—all with serious 
immediate and long-term consequences. The most significant 
cutback low-income households make is on basic sustenance. 
Compared with otherwise similar households able to find hous-
ing they can afford, severely burdened households in the bot-
tom expenditure quartile spend $150 (41 percent) less on food 
each month. They also spend substantially less on healthcare 
and put aside less for retirement.

Another tradeoff is between housing that is affordable and 
housing that is adequate. In 2013, 10 percent of low-income 
renters lived in units that lacked complete plumbing or kitchen 
facilities, experienced frequent breakdowns in major systems, 
or had other physical defects. Housing quality issues are preva-
lent in non-metro areas and tribal lands, where the housing 
stock is more likely to be substandard.   

Housing cost burdens also expose renters to the risk of eviction, 
with all its damaging impacts on household finances, employ-
ment prospects, and school performance. In 2013, 2.1 million 
low-income renters reported that they had missed a rent pay-
ment in the previous three months, and a similar number stated 
they believed they were likely to face eviction in the next two 
months  (Figure 5). Meanwhile, about 710,000 renters had been 
threatened with eviction in the previous three months, with 
nearly eight out of ten of these threats associated with a failure 
to pay rent or other lease violations.

The costs of housing instability are high not just for individual 
households, but also for the government programs ultimately 
needed to support homeless families. But recent research has 
found that providing assistance for permanent housing for 
homeless families can help reduce domestic violence and sub-
stance abuse, keep families together, and limit the number of 
school moves for children. Importantly, the provision of perma-
nent housing is more cost-effective than helping these families 
through the shelter system.

THE GROWING CONCENTRATION OF POVERTY 

One enduring legacy of the Great Recession is the further 
concentration of poverty. In 2000, 6.5 million Americans lived 

Notes: Extremely/very/low-income households earn up to 30%/31–50%/51–80% of area medians. Rent payments were missed within the 
previous three months.  
Source: JCHS tabulations of US Department of Housing and Urban Development (HUD), 2013 American Housing Survey.

Income Group

    

 

 

Extremely Low     

 

 

Very Low     

 

 

Low

Missed Recent 

Rent Payment(s)

Felt Under 

Threat of Eviction

Threatened 

with Eviction

1.2

1.0

0.8

0.6

0.4

0.2

0

Extremely Low-Income Renters 
Are Especially at Risk of Eviction

Households Reporting Housing Insecurity in 2013 (Millions)

FIGURE 5

in neighborhoods with poverty rates of at least 40 percent. In 
2014, the population in these areas had more than doubled 
to 13.7 million, with substantial increases across all racial 
and ethnic groups (Figure 6). Even so, income disparities as 
well as still-high levels of racial segregation have consigned 
25 percent of poor blacks and 18 percent of poor Hispanics to 
high-poverty communities, compared with only 6 percent of 
poor whites.

The consequences of this isolation are profound, particularly for 
children. Harvard University’s Equality of Opportunity Project 
has shown that neighborhood conditions deeply affect a child’s 
success in life, as well as the life expectancy of adults. Indeed, 
each year spent living in a low-poverty community increases the 
chances that a child will attend college and have higher lifetime 
earnings. In addition to these economic benefits, more inclusive 
communities benefit residents through safer and healthier envi-
ronments, including improved air and water quality.

In recognition of these impacts, HUD strengthened its fair 
housing regulations by issuing a final rule on Affirmatively 

Furthering Fair Housing in 2015. The rule requires state and 
local governments that receive HUD funds, along with all public 
housing agencies, to identify patterns of segregation in assisted 
housing and set priorities for addressing disparities. At the same 
time, a recent Supreme Court ruling on disparate impacts may 
help to increase the location of new Low Income Housing Tax 
Credit (LIHTC) units in higher-opportunity communities. 

But efforts to broaden the availability of affordable housing 
in better communities must be viewed within the context of 
growing segregation by income in the private housing market. 
According to the Lincoln Institute of Land Policy, more than 500 
local jurisdictions have implemented inclusionary housing poli-
cies, but the scale and intensity of these programs vary widely 
and have yet to reach the scale of federal programs.

THE OUTLOOK

While the rental market continues to expand at a robust pace, 
the owner-occupied market is still in the process of recovery. 
Home prices have rebounded sharply in several markets, but 
they also remain depressed in other areas, leaving millions of 
owners still underwater on their mortgages. Foreclosures have 
fallen steadily, but the share of owners seriously delinquent on 
their loans remains roughly twice what it was before the down-
turn. Household credit and balance sheets will take more time 
to fully heal. Growth in homeowner demand is therefore likely 
to remain moderate over the next few years as these headwinds 
finally abate.

But with household growth projected to average over 1.3 million 
annually over the coming decade, housing construction should 
continue to climb and help keep the overall economy on solid 
footing. In addition, the homeownership rate should at least 
stabilize in the next few years as foreclosures ebb, mortgage 
credit conditions improve, and household incomes rise.

As it is, however, the need for more affordable rental housing 
is urgent. The record number of renters paying more than half 
their incomes for housing underscores the growing gap between 
market-rate costs and the rents that millions of households can 
afford. Governments at all levels must redouble their efforts 
to expand the affordable supply. And with growing recogni-
tion that children’s lifelong achievement rests on stable, safe, 
and healthy living conditions, policymakers must also ensure 
better access of minority and low-income households to higher-
opportunity communities. 

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6

Notes: White, black, and other households are non-Hispanic. Hispanic households may be of any race. Other includes Native Hawaiian and 
other Pacific Islanders, American Indians, Native Alaskans, and people of two or more races.
Source: JCHS tabulations of US Census Bureau, 2000 Decennial Census and 2010–2014 American Community Survey 5-Year Estimates. 

 

 

2000     

 

 

2010–2014

White

Other

Black

Hispanic

6

5

4

3

2

1

0

Race/Ethnicity

The Number of People Living in Concentrated Poverty 
Has More than Doubled Since 2000

Population Living in Census Tracts with Poverty Rates of 40 Percent or More (Millions) 

FIGURE 6

HOUSING MARKETS

7

J O I N T  C E N T E R   FO R   H O U S I N G   S T U D I E S   O F   H A R VA R D   U N I V E R S I T Y

After a mixed year in 2014, the 

national housing recovery gained 

traction in 2015. Residential 

construction continued to climb 

as single-family starts revived. 

Sales of both new and existing 

homes also increased, and likely 

would have been even stronger if 

inventories were not so low. The 

widespread rise in home prices 

benefited millions of underwater 

homeowners and spurred 

renewed investment in homes 

and rental properties. With this 

rebound, the housing sector has 

increased its contribution to the 

economy, with more room to grow. 

CONSTRUCTION GAINING MOMENTUM

Homebuilding remained on the upswing in 2015, with total 
housing starts climbing 10.8 percent to 1.1 million units 
(Figure 7).

 Single-family starts reached the 715,000 mark 

while completions hit 647,900 units, their highest level since 
2008. Even so, the single-family sector is still struggling to 
recover after a decade of weakness, with only 750,000 units 
completed annually on average between 2006 and 2015—the 
lowest number in any 10-year period since 1968. But single-
family construction is set to expand thanks to an 8.7 percent 
increase in permits, to 696,000 units. In fact, single-family 
permitting accelerated in 2016, averaging 730,000 units at a 
seasonally adjusted annual rate in the first four months of 
the year.

On the multifamily side, all key construction measures rose by 
double digits. Growth in multifamily starts topped 10 percent 
for the fifth consecutive year in 2015, reaching a 27-year high of 
397,300 units. With single-family construction still recovering, 
2015 was the fourth consecutive year that multifamily units 
accounted for more than 30 percent of housing starts, compared 
with 20 percent on average between 1990 and 2010. Signaling 
further expansion, multifamily permits rose 18.2 percent last 
year, to 486,600 units.

Overall construction activity expanded nationwide, with per-
mitting up in 70 of the 100 largest metro areas. Just over a 
third of these metros issued more permits in 2015 than their 
annual averages in the 1990s, and 20 issued more than their 
annual averages in the early 2000s. New York was the stand-
out, with permits (primarily for multifamily units) soaring 
80 percent in 2015, due in part to the impending expiration 
of a tax abatement program. But permitting in Dallas, Los 
Angeles, Miami, San Diego, and San Francisco also increased 
more than 25 percent last year. In contrast, several of the 
markets that had rebounded quickly after the recession saw 
permitting slow, including Washington, DC (down 7 percent), 
Houston (down 11 percent), San Antonio (down 24 percent), 
and San Jose (down 42 percent).

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8

CHARACTERISTICS OF THE NEW STOCK

Single-family homes are getting bigger, with the median size 
in 2015 a record-setting 2,467 square feet. Indeed, only 135,000 
single-family homes completed in 2014, or about a fifth, were 
under 1,800 square feet—the lowest number and the smallest 
share of units this size going back to 1999 (Figure 8). The majority 
(58 percent) of single-family construction between 2000 and 2014 
occurred in low-density urban areas, with another 25 percent 
built in mid-density urban neighborhoods, 6 percent in high-
density urban neighborhoods, and 12 percent built in rural areas. 

Meanwhile, the median size of multifamily units fell from 
nearly 1,200 square feet at the 2007 peak to 1,074 square feet in 
2015, reflecting the shift in the focus of development from the 
owner to the rental market. Many new multifamily units are in 
large structures, with nearly half of the units completed in 2014 
in buildings with 50 or more apartments. In addition, a majority 
of newly constructed units were located in dense urban areas. 
Indeed, about 36 percent of all new multifamily units added 
between 2000 and 2014 were in high-density neighborhoods, 
and another 30 percent each in medium- and low-density sec-
tions of metro areas. Even so, growth in the multifamily housing 
stock during this period was even more rapid in rural areas (up 
24 percent) than in urban areas (up 19 percent). 

THE DEVELOPMENT LANDSCAPE

The gradual recovery in single-family construction largely 
reflects weak demand in the face of sluggish income growth and 
tight mortgage credit. But constraints on land, labor, and lend-
ing may also play a role. Metrostudy data show that the supply 
of construction-ready land (vacant developed lots) in 50 metro 
areas shrank by 30 percent from 2008 to 2013, before settling 
just above levels posted in the early 2000s. 

Land supply is firming across metro areas, including those with 
significant excesses during the housing bubble. In major Florida 
metros, for example, the average months supply of vacant 
developed lots soared after 2006, dropped precipitously after 
2009, and stabilized in 2015 at 34 months—within the 24–36 
month range considered normal. While experiencing milder 
cycles, major metros in California and Texas had only about a 
20-month supply of vacant developed land in 2015, raising the 
possibility of future constraints on building activity. Land avail-
ability in these large states, among others, thus bears watching.

Labor shortages could also be a damper on construction activity. 
More than 2 million workers left the industry between 2007 and 
2013, reducing the construction workforce to 80 percent of its 
2007 peak. According to a Census Bureau analysis, only 40 percent 
of those who lost their jobs between 2006 and 2009 had returned 
to their previous positions or to other jobs in the industry. Of the 
remaining displaced workers, more than half found work outside 
construction and the rest did not return to the formal labor force.

Source: JCHS tabulations of US Census Bureau, New Residential Construction data. 

Square Footage    

 

 

Under 1,800     

 

 

1,800–2,999     

 

 

3,000 and Over

800

700

600

500

400

300

200

100

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

1999

Construction of Smaller Single-Family Homes 
Has Yet to Rebound

 New Single-Family Homes Completed (Thousands)

FIGURE 8

Key Housing Market Indicators 
Point to Strengthening in 2015

FIGURE 7

2014

2015

Percent 
 Change

2014–15

 

Residential Construction (Thousands of units) 

Total Starts

1,003

1,112

10.8

       Single-Family

648

715

10.3

    Multifamily

355

397

11.8

Total Completions

884

968

9.5

       Single-Family

620

647

4.5

    Multifamily

264

320

21.2

Home Sales

New (Thousands)

437

501

14.6

Existing (Millions)

4.9

5.3

6.3

Median Sales Price (Thousands of dollars)

New

283.1

296.4

4.7

Existing

208.5

222.4

6.6

Construction Spending (Billions of dollars)  

Residential Fixed Investment

550.6

600.1

9.0

       Homeowner Improvements

134.8

147.8

9.6

Notes: Components may not add to total due to rounding. Dollar values are adjusted for inflation by the CPI-U for All Items.

Sources: US Census Bureau, New Residential Construction and New Residential Sales data; National Association of Realtors®, Existing Home Sales;  
Bureau of Economic Analysis, National Income and Product Accounts.