The proliferation of questionable subprime mortgages, coupled with the fallout from the economic recession of the late 2000s, led to waves of home foreclosures throughout the United States — and a shift in public attitudes relating to home ownership. Since the financial crisis, policymakers, experts and the media have been monitoring the housing market as an indicator of the economy’s health, and have watched the outcomes — both economic and residential — of this crisis.
A 2012 report by the Joint Center for Housing Studies at Harvard University, “The State of the Nation’s Housing 2012,” utilizes multiple sources of national survey data from the previous four decades to examine the current state of the U.S. housing market and the variables that influence its recovery. The findings are organized into five sections: signs of recovery in the for-sale market; the rental market rebound; the continuing slide in home ownership; prospects for household growth; and the increasing prevalence of cost burdens.
Key findings include:
- While 2011 was one of the worst years for the housing market since 1968, the market is showing signs of recovery in 2012 as home construction, sales and remodeling expenditures have all increased from the previous year’s levels.
- “Homeowner distress has begun to abate, with the share of loans 90 or more days delinquent falling steadily from 5.1% of mortgages at the end of 2009 to 3.1% in the first quarter of 2012.”
- Household growth, the primary driver of housing demand, has declined significantly in the recession due to fewer younger adults establishing households and fewer new immigrants. From 2007 to 2011, only 600,000 to 800,000 new households were formed annually, the lowest levels since the 1940s.
- Researchers point to “both the high level of foreclosures and the slowdown in households moving into home ownership” to explain a steady decline in home ownership rates over time. As of the first quarter of 2012, the home ownership rate stood at 65.4%, the lowest level since the first quarter of 1997.
- The past decade marked the highest increase in the number of renter households in the past 60 years. Renter households increased by 1 million in 2011, driven primarily by younger adults and minorities.
- The rental market has been tightening in many areas: “Adjusting for inflation, San Francisco led the nation with a double-digit rise, but real rents in metros in the Northeast (Boston and New York), South (Austin), and West (Denver) were also up 3.0% to 5.0%. Even in several markets associated with the foreclosure crisis (including Detroit, Cleveland, and Ft. Myers), real rents are climbing.”
- While post-recession home prices appear to have stabilized, the cost of housing has risen considerably over the past decade and has stressed low-income households in particular. Between 2007 and 2010, the number of households earning less than $15,000 annually and spending more than half their salary on housing jumped by 1.5 million.
“Despite the drop in [ownership] rates for all age groups under 65, however, the overall rate stands well above the 64% prevailing in the 1980s and first half of the 1990s,” the researchers note. “Indeed, the national rate remains relatively strong both because the ranks of households with heads aged 65 and over are growing and because homeownership rates among this age group are near record highs…. While rates for younger households may fall further in the next few years, the aging baby boomers will help to mitigate the impact on the national homeownership rate.” But the longer-term future of the housing market hinges on the ability for the large demographic cohort known as Millennials or “echo boomers” — the children of Baby Boomers ages 17 to 31 — to secure stable, steady employment and start households.
Tags: economy, municipal