The State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University portrays a stalled housing market still facing numerous challenges that prevent a return to vibrant growth. The report points out that millions of owners now owe more on their mortgages than their homes are worth, existing home sales remain depressed, and new home sales remains at near record lows.
The study said a large number of vacancies and foreclosures are keeping home prices low.
Housing markets are in a state of turmoil in places with a large number of foreclosures; 10% of neighborhoods in the United States accounted for almost half of home foreclosures in 2010.
A growth in demand is needed to bring life back into the housing market, where new home construction has been at record-low levels for three years. While housing affordability is extremely high, the unemployment and tightened lending standards that also came about as a result of the recession make for fewer first-time home buyers.
The rental housing market may be the first to show significant recovery. "Rental housing markets are tightening and may begin to lead a modest recovery in housing construction this year,” says Chris Herbert, Research Director of the Joint Center for Housing Studies. “But we need sustained employment growth to spur a broader increase in housing demand and a recovery in home sales.”
Even without signs a broad turnaround in housing, the report points out that the market could turn quickly, evidenced in the healthy boost in home sales and prices brought about by the 2010 homebuyer tax credit.
Growth in both younger and older households in the next 10 years should continue to lift the demand for rental housing as well as for smaller homes, the report said. The number of households over age 65 will be up by some 8.7 million over 2010-2020.
“While most of these households will age in place, current mobility rates suggest 3.8 million could downsize over the coming decade, adding further to demand for smaller homes," said Herbert.
As rental markets tighten, renters will face affordability problems. The report said a "surge in burdens" by renters and by owners resulted in a record high number of 19 million American households paying more than half their income for housing (using 2009 data, the latest available). Such cost burdens are increasingly affecting moderate-income and middle-income households. The report said severe-cost burden rates among $45,000-$60,000 households nearly doubled from 2001-2009.
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