Aug 8, 2019

Investors are snapping up houses at a record pace

The housing market slump continues, and one little-discussed driver has been the increasing share of housing owned by investors who are looking for financial gains rather than a place to live.

The big picture: The supply of starter homes is already historically low and with prices continuing to rise and young potential buyers more indebted than ever, there's little sign that the struggles in the housing market will correct in the near-term, analysts say, even with low mortgage rates.

Details: Private equity firms, real estate speculators and other investors made up more than 11% of U.S. homebuyers in 2018, the highest percentage on record and significantly higher than the level seen before the 2008 housing crash, according to recent data from CoreLogic.

  • Not only has the investor share of homes risen to a record high, but investors are taking an even greater share — also a record high — of so-called starter homes, or the smaller, more affordable houses that typically attract lower-income and first-time buyers.

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D.C.'s growing low-cost housing gap

Adapted from Turner et. al, 2019, "Meeting the Washington Region’s Future Housing Needs"; Chart: Axios Visuals

The Washington D.C. region already has a severe shortage of affordable housing, and that deficit will widen over the next 10 years, according to a new report out today from the Urban Institute.

Why it matters: The lack of affordable housing means many low-income families, especially renters, have high cost burdens, live further away from their jobs and have long commutes — or end up leaving the region altogether.

  • Without affordable housing, employers have to pay more to attract and retain workers. Washington is the 5th-largest employment market in the U.S., and recent employment has grown fastest in the low- and high-wage jobs.

What's coming: The Washington, D.C. region needs 374,000 additional housing units by 2030, according to the economic growth rate projected by the Metropolitan Washington Council of Governments.

  • 40% of those additional units would need to be in the middle-cost range, and another 38% would need to be low-cost units to match projected needs. Low-income employment is expected to grow faster than the number of high-paying jobs.
  • D.C. Mayor Muriel Bowser has set a goal of building 36,000 new housing units, including 12,000 affordable units, by 2025.

The problem: Overall, the D.C. region's building has not kept pace with its population growth. Since 2010, it has added housing units at only 56% of the rate produced during the 2000s.

  • Most of the region's new housing development has occurred outside of the District of Columbia. And every jurisdiction had shortage of lowest-cost units, according to Urban Institute's analysis.
  • There's also significant competition for the existing low-cost housing units: The report found most households in the lowest-cost units could actually afford to pay more for rent — meaning they're squeezing out the households who really need the lowest rents.

The big picture: Due to the high cost of development in the area, the market doesn't incentivize the creation of more lowest-cost housing units without significant subsidies. But it's unlikely that federal funding for public housing and vouchers will increase anytime soon.

  • Affordability commitments will end for more than 80% of today's affordable units by 2035, raising worries that owners may choose to redevelop it to fetch the market rate when that time comes.
  • Only 6.7% of the region's vacant lots are zoned for multifamily housing.

What's next: Urban Institute researchers recommend that the local governments make targeted investments that preserve existing affordable housing units, while also incentivizing developers to build more in the low- and middle-cost ranges.

Study: California's land-use rules worsen housing crunch

A view of homes and apartments in San Francisco. Photo: Justin Sullivan/Getty Images

Some California cities with stricter land-use regulations had lower growth in housing supply, according to a new paper out today from the Mercatus Center at George Mason University.

The big picture: Cities across the country are wrestling with housing affordability. Minneapolis became the first to scrap single-family zoning, followed by Oregon with the first statewide ban. Meanwhile, Des Moines is moving in the opposite direction with zoning changes aimed at lower density.

Go deeperArrowAug 28, 2019

A great day for safe-haven assets

Photo: artpartner-images/Getty Images

The stock market rebounded Wednesday, with major U.S. indexes finishing the day slightly higher or little moved from where they opened, but prices on safe-haven assets like gold, the Japanese yen and U.S. government debt continued to rise.

What happened: Gold prices rose to a 6-year high, above $1,500 per troy ounce, while the yen broke through 106 per dollar, nearing a 5-month high, and U.S. Treasury prices rose, taking down yields on the benchmark 10-year note below 1.6% in early trading.

Go deeperArrowAug 8, 2019