Housing Prices Likely to Remain High as Supply Remains Low, Disproportionately Affecting Minorities

Economics
Published

Housing demand remains strong amid tight supply, a tight credit market and low interest rates, while major urban areas experience higher-than-average vacancy rates and declines in rent as renters shift to suburban markets.

However, the pandemic has not only created a shift in demand; it has also shone a brighter light on housing disparities, according to The State of the Nation’s Housing 2021 report from Harvard University’s Joint Center for Housing Studies (JCHS).

Data from the report note that households of color and renters are more likely to be behind on payments — a concerning factor as forbearance and eviction moratoria policies begin to expire. Many households were already cost burdened — i.e., paying more than 50% of their income toward rent — prior to the pandemic, placing additional financial burden on them. Overall, 17% of renters are in arrears, with a greater percentage of Black (29%), Hispanic (21%) and Asian (18%) renters behind in payments than white (11%) renters.

Home owners have fared somewhat better, with a majority of the 7.1 million loans in forbearance either current or paid off as of March 2021. But the 2.3 million borrowers that have not resumed payments may face challenges, especially if the missed payments, property taxes and insurance premiums exceed the value of the home. Racial disparities are present here as well, with Black, Hispanic and Asian home owners making up a greater percentage (15%+ each) of borrowers in arrears than white home owners (less than 10%).

Spikes in home prices will also challenge housing affordability moving forward. The market’s historically low supply — which dropped below two months for the first time ever — will need to catch up for the market to moderate.

“I don’t think we’re in a bubble,” noted Chris Herbert, JCHS managing director, during the report’s livestream release. The factors contributing to the current rise in housing prices is substantially different from the rise seen before the Great Recession, he added, which was fueled in large part by a less stringent lending market.

“The Joint Center for Housing Studies 2021 report confirms NAHB’s overview of the housing market over the past few years,” said NAHB Chief Economist Rob Dietz. “The housing market lacks supply, and residential construction has been challenged by a number of issues such as regulatory burdens, building material availability, land/lot access, and a skilled labor shortage.”

Rising home prices are likely to continue as supply remains low, due in part to sharply rising material costs. This will continue to price people out of the market, particularly people of color. The report notes that neighborhoods in which minorities comprise more than half the population saw price increases on average of 14.3% — 3.5 percentage points higher than the average for metro areas overall.

“The best solution to tame recent unsustainable gains in home prices, and to similarly ease rent burdens is more supply: more single-family and multifamily construction and more remodeling of the existing housing stock,” Dietz added.

To read the full report, visit jchs.harvard.edu.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Advocacy | Economics

Jun 18, 2025

Podcast: Mid-Year Update on Economic Indicators and Advocacy Priorities

On the latest episode of NAHB’s podcast, Housing Developments, COO Paul Lopez welcomes NAHB Chief Economist Dr. Robert Dietz and Chief Advocacy Officer Ken Wingert for a mid-year check in on key economic indicators and NAHB policy priorities driving home building for the rest of 2025.

Economics

Jun 18, 2025

Sharp Drop in Multifamily Production Brings Overall Housing Starts Down

Overall housing starts decreased 9.8% in May to a seasonally adjusted annual rate of 1.26 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

View all

Latest Economic News

Economics

Jun 18, 2025

Sharp Drop in Multifamily Production Brings Overall Housing Starts Down

A sharp decline in multifamily production pushed overall housing starts down in May, while single-family output was essentially flat due to economic and tariff uncertainty along with elevated interest rates.

Economics

Jun 17, 2025

Builder Sentiment at Third Lowest Reading Since 2012

In a further sign of declining builder sentiment, the use of price incentives increased sharply in June as the housing market continues to soften.

Economics

Jun 16, 2025

Permit Activity Weakens in April 2025

Housing permits continued a downhill trend for the fourth month in a row, pointing to a broader residential construction slowdown for 2025. Over the first four months of 2025, the total number of single-family permits issued year-to-date (YTD) nationwide reached 320,259.