The FWD #142 • 388 Words
Two conflicting trends in 2020 highlight the extreme bifurcation in the nation’s housing market.
It was the best of times, it was the worst of times. In 2020, the year of the pandemic, existing home sales reached their highest level since 2006. That year had the highest sales in US history and marked the run up in housing prices leading to the market collapse and foreclosure crisis in 2009. The number of home sales in 2020 came in just under 7 million.
Lawrence Yun, chief economist for the National Association of REALTORS®, estimated that sales might have reached an all-time record of 8 million if supply constraints weren’t so severe. Those supply constraints did push home prices higher—the average sales price in December was just under $310,000, up almost 13% over the previous year.
At the same time, 2020 became a crisis for millions of renters. The National Council of State Housing Agencies has estimated that as many as 23-34 million renters could be at risk of eviction in early 2021. This includes almost 200,000 renter households in Virginia. The estimated aggregate amount of rent owed in the state is in the range of $590-$800 million as of January 2021. With the recent announcement that Virginia will receive over $560 million in emergency rental assistance from the December COVID-19 relief bill, we’re hopeful that a massive eviction crisis here can be averted.
What explains the stark difference in these two segments of our housing market in 2020? The median renter income in Virginia is $48,085 while the median homeowner is $91,110. Renters have been far more likely to be affected by COVID-19 since they are concentrated in lower wage employment—sectors that have been hit much harder by the pandemic. Renter households have significantly less wealth and savings, so when a crisis happens, renters have far less financial resilience. Renters, and particularly very low income renters, are much more likely to be cost burdened or extremely cost burdened than their home-owning counterparts, leaving little room to absorb a financial setback.
We’re happy that more Americans had the chance for homeownership in 2020. But the lesson from last year is that we need stronger support for affordable rental housing and better strategies to ensure stability for the third of the nation who rent their homes.