Millennials facing today’s difficult housing market, and the challenges of buying their first home, can wistfully imagine the ’50s and dream of a time when government policy and growth made buying a home easier for much of the population. But, as a new comparison between today’s market in the late ’80s suggests, they don’t need to look quite that far back to find a more promising housing market.
The Harvard Joint Center for Housing Studies’ annual State of the Nation’s Housing report has provided a measuring stick for changes in the home and rental market in the United States, tracking the vibrancy of the rental and homebuilding market, and whether the nation was making progress on the serious issue of affordability.
On the 30th anniversary of the report’s first release, the authors created a comparison showing how the housing market of 1988 measures up against the market today. The chart below demonstrated the significant shifts of just the past few decades, and shows how things have gotten harder for younger buyers. It wasn’t all easy—interest rates hovered around 10.5 percent, for one thing—but the overall decrease in young adult homeownership reflects how things have shifted.
Overall, homes were smaller, but easier for the average American to afford (based on the cost-to-median-income comparison), and supply was much healthier. The student loan burden was also significantly smaller. This time capsule underlines the serious supply and cost challenges we face today, especially single-family homes, as well as the rise in the rent-burdened population. Note that due to the variety of data sources, some information comes from 1989 or 1990, and has been marked as such in the chart below.
Then and Now: The Housing Market in 1988 versus 2017
|Median new home sale price (*)||$233,184||$323,100||$89,916||39%|
|Median new home size||1,810||2,422||612||34%|
|Median existing home sale price||$187,053||$247,200||$60,147||32%|
|Median price-to-income ratio||3.2||4.2||1||31%|
|New units completed||1,530||1,153||-377||-25%|
|New single-family homes completed||1,085||795||-289||-27%|
|Inventory of existing single-family homes for sale||2,160||1,290||-870||-40%|
|Months’ supply of existing single-family homes for sale||8.6||3.9||-4.7||-55%|
|Millions of rental households (*)||32.8||43.8||11||33%|
|Share of households aged 20-39 w/student loan debt (#)||24.30%||43.50%||19.2 ppts||79%|
|Share of debtors w/$50,000 or more student debt (#)||3.60%||21.20%||17.6 ppts||489%|
|Median student loan debt balance (#)||$5,600||$19,000||$13,400||239%|
|Millions of households with cost burdens (*)||24.3||38.1||13.7||56%|
|Millions of renter households with severe cost burderns (*)||6.3||11||4.7||75%|
|Percent of households with severe cost burdens (*)||11.50%||15.60%||4.1 ppts||36%|
|Homeownership rate for 25–34 year olds||45.20%||39.20%||6.0 ppts||-13%|