Harvard’s Joint Center for Housing Studies will release its State of the Nation’s Housing 2010 report the morning of Monday, June 14. The annual report provides a concise summary and analysis of recent trends and emerging issues in the nation’s housing markets and a discussion of what might be expected in the coming year. The 2010 report finds room for optimism about the nation’s housing market, but also reveals that recent progress is fragile and highly dependent on continued job growth.
According to the report, affordability problems became even more pervasive in the 2000s, despite falling home prices, stagnant rents, and growing vacancies, as households lost jobs and incomes. The proportion of Americans spending more than half of their incomes on housing jumped to 16% in 2008, from 12% in 2000. Nearly a quarter of renters and one in eight owners had severe cost burdens in 2008. From 2007 to 2008 alone, the number of severely cost burdened households increased by 640,000.
The report highlights in particular the plight of the nation’s 4.5 million single parent households, which together contain 9.1 million children. The affordability challenges for these families are particularly stark, because these households have lower incomes than dual-income households, but also greater space and housing and neighborhood quality requirements. The median percent of income that low income single-parent households spent on housing was 63%. The report also says that the number of multiple-earner families declined by 2.7 million between 2007 and 2009 as the recession took hold and the number of households with no earners increased by 2.2 million. In all these trends, young and minority workers are the hardest hit.
One factor contributing to the decrease in affordability is
the loss of low-cost rental properties. In the ten-year period beginning in 1997 more than one in four units that would rent for under $400 in 2007 dollars were lost, due to demolition, conversion to ownership or other uses, or increased rents. Fully 45% of these rentals were government subsidized and the majority were outside of center cities in the South and Midwest. More than 13% were lost to demolition alone.
Looking at the overall demand and supply for housing, the report finds that there has been a significant rise in rental vacancies and units held off the market in the past year, despite a precipitous drop in new construction. This rise appears to be due to an increase in the number of people per household and to a reduction in immigration, both likely the result of a downturn in the economy. Though the increase in vacancy has recently been largely observed in the for-rent market, the report notes that this is likely due to the growing number of for-sale homes that cannot be sold and instead are being offered for rent.
In another trend affecting home sales, Americans have become less mobile in the downturn, with the mobility rate falling by 12.6% from 2005 to 2008. A lack of job prospects and lower home equity has made it more difficult for Americans to move, with the trend particularly striking among homeowners and older Americans.
The authors conclude, however, that falling for-sale housing prices and a continued increase in employment should serve to offset these trends in the coming year, with a full recovery, including the most devastated markets, coming in perhaps three years. The report notes that in the last year there has already been an increase in sales of existing homes and a deceleration of declines in new home sales, housing starts, home prices, home equity, residential investment, and spending on home improvements. Still, many of the gains appear to be assisted directly or by stimulus policies, including the additional homebuyer credit. The continuing strength of labor markets and the ability of the economy to add large numbers of new jobs remains the most important and uncertain variable in the recovery of the housing market, the report notes.
The report will be available at http://www.jchs.harvard.edu/ after 11 am ET on June 14.