Stuck in Place

A lot has been written about the lingering effects of the Great Recession on the housing market – we’ve done our fair share of it in this space – but something we haven’t really covered is reduced mobility of Americans that has resulted. To put it simply, Americans just don’t move as much anymore. This article at Slate helps us understand what that means:

Americans are no longer the footloose strivers of popular imagination. It’s not just about moving between states, a long-running and well-documented phenomenon that has recently leveled off. Most of the current decline is from Americans not making local moves, either. Three million fewer local moves in 2016 vs. 2006, in fact, compared with just 200,000 fewer interstate moves. Eleven percent is the lowest mobility rate on record, and as the annual report from Harvard’s Joint Center for Housing Studies shows, it’s stuck in a feedback loop with several features of the housing market.

One reason for fewer moves is that older people tend to move less. Many own their own homes and have paid them off so they don’t want to leave them. Some live in high-cost areas with mechanisms like rent control that makes moving too expensive.

Another reason is something that the apartment industry has been impacted by for years:

It’s not just your parents’ fault. After the recession, nearly 4 million single-family homes, many purchased in foreclosure auctions, became rentals. (That’s about three percent of the total U.S. housing stock.) Big-time landlords who own dozens or even hundreds of properties are a rising force in U.S. cities, and their purchases have taken a big chunk of homes off of the market. There are fewer single-family homes for sale than at any time since 1982. Adjusted for the nation’s population gains in that time, the shortage is even more severe.
There’s scarcely more slack if you’re looking for an apartment.

As you might expect, this has driven home prices through the roof. Prepare for sticker shock when you Zillow that neighborhood you’ve been picturing yourself in. But those high prices haven’t produced the housing-construction boom that your Econ 101 professor would predict. On the contrary, fewer homes are being built per capita than at almost any time in history. The Harvard report cites a few reasons for this: fewer vacant lots, land use restrictions, building material costs, and a skilled worker shortage. What’s clear is that even as America’s (very bad) sprawl model continues its slow decline, nothing has emerged to replace it. New construction in most major cities remains vastly outpaced by demand.

The result of all this? Young people, those who are historically most likely to move, are staying put. Just 24% of 20-24 year-olds moved last year, which is down from 34% in 1996. This affects renters as much as homeowners:

This mobility drop holds for renters as well as would-be owners. Except at the very high end, tenants are still under historic levels of financial stress, which may discourage them from making expensive moves, even if a better neighborhood or apartment might be out there.