Joint Centerís Housing Report Points to Challenges Ahead
Posted by Rooflines on June 29, 2009
Describing the problems facing the housing market today as “hard to overstate,” representatives from Harvard’s Joint Center for Housing Studies last week announced the release of the 2009 “State of the Nation’s Housing” report. The report, which acknowledges the depressed state of the housing market, points to negative macro forces that are still in play, despite “unprecedented federal efforts to jumpstart the economy and help homeowners keep up with their mortgage payments.”
With 3.2 million homeowners entering foreclosure in 2007-2008, the report states that any recovery will likely be prolonged.
The report goes on to state that while some sectors of the housing industry, namely new and existing homes, are stabilizing, the continued trend of job loss, home devaluation, and tightening credit markets could hamper any recovery in the short term.
“Millions of Americans entered the recession with severe housing cost burdens and deep in debt,” the reports reads, adding that the number of households paying more than half their incomes for housing increased to 17.9 million in 2007 — up 77 percent from the 13.8 million in 2001. The report adds that while homeowners made up for the majority of those increases, “the share of renters with severe burdens remained much larger.”
At the report’s public release on June 22 at the Ford Foundation in New York, Joint Center Executive Director Eric Belsky pointed to the myriad forces working against any quick recovery. In regard to home sales, he outlined the weak demand in the market (“we’re hoping to see a bottom”) and a deep inventory of unsold homes — roughly 500,000. “The seeds of recovery have been planted, but we‚Äôre not necessarily on our way,” he said. “We have to move the markets back into balance, and get back to a more normal level of demand. New home sales have been up and down and up again.
“This is a very unusual time and the headwinds are significantly strong.” Belsky added that the country is facing the “worst downturn in a generation.”
Despite improving conditions, home sales remain stagnant, and Joint Center representatives placed an emphasis on “long-run demand,“Ě particularly housing demands of the Echo Boom generation: the children of the Baby Boomers born between 1982 and 1995, and the demands of the increasing immigrant population.
The housing challenges facing minorities are disproportionately high, according to Joint Center Research Analyst Daniel McCue, with the “most chronic, stubborn challenge“Ě being the issue of affordability. “Working full time is not enough to afford a modestly priced, two-bedroom apartment anywhere in the U.S.,” he said. Minority households are more likely than others to spend over half of the household income on housing. Moreover, minority neighborhoods have disproportionately high foreclosure rates, further devaluing the housing stock.
Energy consumption, living beyond one’s means, and trends in smart growth were also addressed. Sheila Crowley, Executive Director of the National Low Income Housing Coalition, in calling the imbalance between high vacancy rates in rentals and growing unaffordability “vexing,” expressed a need for homeowners and tenants alike to rethink their own expectations and needs when it comes to living accommodations:
“Housing seems to be more in tune with what people want rather than with what they need.” She also called for the “right mix” of homeownership and rental housing, saying that the “rush to homeownership produced catastrophic effects.” But with FY2010 providing an initial capitalization of $1 billion for the National Housing Trust Fund, designed to encourage developers to build affordable units in mixed-income markets, Crowley said there were glimmers of hope.
“It’s the best budget we’ve seen in a long time, and it puts the money out there for the construction of low-income housing.” Though Crowley added that the funding “falls short.” The Coalition had initially called for a $10 billion Congressional down payment and an additional $3.5 billion for Section 8 housing vouchers.
Both Crowley and McCue placed an emphasis on energy consumption as a path to affordability, with Crowley pushing for smaller rentals and houses and a tax policy that “needs to reward modest living.”
Another key component to any recovery is builder confidence, though any recovery this time around is unlikely to be the quick rebound, or V-shaped. Recovery is going to be more market correction-oriented, or, “L-shaped,” said Gary Garczynski, the president of the National Capital Land and Development Company, a developer for large national builders. That L-shaped, or “bathtub” recovery, will feature more conservative lending practices (the days of no down payment are gone”) as well as stabilizing housing for the private sector.
*Editor’s Note: This report was originally published on www.nhi.org*.