The Joint Center for
Housing Studies released its annual State of the Nation's Housing
report last week. Key points indicate a housing recovery that it coming on strong for some but
not all Americans. The Report uses
oft-cited data to demonstrate that the recovery is well underway:
was the second consecutive year home prices increased by double
digits. In March 2013 the annual increase was 11.6 percent.
gains are broad based. Prices are up in all but two states and in
94 of 100 metros tracked by CoreLogic.
home sales increased 9.4 percent to 4.66 million between 2011 and
2012, the largest precentage increase since 2003-2004. New home
sales posted their first year-over-year increase in seven years in
the fourth quarters of 2011 and 2012 the number of underwater
homeonwers fell by 1.7 million to 10.4 million.
were only 1.8 million existing homes on the market at the beginning
of 2013, a half million fewer than the previous year and the lowest
level since 2001.
were only around 150,000 new homes, a historic low, available
throughout 2012. As the spring market began in 2013 new homes for
sale represented only a 4.0 month supply, the shallowest inventory
since October 2004.
rebounded in 2012 growing to 980,000 households from around 600,000
average over the previous five years.
households remain pre-recession levels but still registered the
largest increase since 2008.
2013 was the 34th consecutive month CPI measured rents grew and the
15th month annual increases exceeded 2.5 percent.
more households opt to rent the rental vacancy rate fell for the
third straight year to 8.7 percent, the lowest level since 2001.
low interest rates made a payment on a typical home the lowest since
recordkeeping began in 1972 and about half the peak of $1,266 in
four major metropolitan areas had median payment to median income
ratios outside the range considered affordable - 25 percent - in
reached its highest level since 2006 and 1.1 million homeowners were
able to refinance underwater or near-underwater properties,
substantially lowering their monthly payments.
construction picked up sharply, contributing to the broader economy
for the first time since 2005. Residential fixed investment,
including home improvements, contributed a quarter point in economic
growth in 2012 and represented12 percent of the economy's total
family construction starts rose 24.3 percent in 2012 to 535 units,
but was still only half the annual level of the 1980s and 1990s.
starts were up 37.7 percent in 2012 to 245,300 units, the second
straight year of double-digit gains.
improvement spending accounted for 45 percent of residential
investment expenditures in 2012 compared to an average of 25 percent
in the decades preceding the housing crash.
report looks at the role that investors are playing in the recovery;
they bought one in five homes sold in 2012. In contrast, first-time
homebuyers are not driving sales. Their estimated share of sales
only moved from 37 to 39 percent even as the economy improved between
2011 and 2012.
presence of investors in the market has resulted in a sharp increase
in the numbers of single-family homes that are now rental properties
Fourteen million houses were converted from ownership to rental
(net) between 2009 and 2011 and the percentage of renters living in
single family houses rose from 30.8 percent in 2005 to 34.1 percent
in 2011. The number of renters increased by more than 1.1 million
between 2011 and 2012. This represents all net household growth
during that time.
composition of those renters has also changed. One of the groups
traditionally high in homeownership, households aged 55-64,
increasingly became renters, with renting households growing by 80
percent between 2002 and 2012 while all other renter age groups grew
by 50 percent. Other groups with traditionally high homeownership
rates also became renters including married couples with children,
high-income households, and white households.
shift occurred in 2012 as institutional investors moved into areas
such as Atlanta, Law Vegas, and Phoenix where strong pre-recession
growth was strong where housing took a real hit as foreclosures
increased. Investors accounted for about 14 to 18 percent of sales
in these cities at the beginning of 2012 but their share had
accelerated to around one-quarter by the end of the year.
Joint Center sees two demographic trends shifting housing demand.
Older households are projected to increase by 9.8 million over the
coming decade as baby boomers move into the 65-and-over age group and
the new minority households will account for seven of ten formed.
Minority households are expected to increase by 8.7 million between
2013 and 2023.
the good news about the recovery, however, the report points to a
number of areas of concern. First, homeownership rates are still
declining. Eric S. Belsky, Managing Director of the Joint Center
record keeping began
homeownership rate for African American households it at its lowest
level since 1995 (43.9 percent), and both the Hispanic and White
rates are at their lowest level in a decade, 46.0 percent and 73.5
foreclosures and delinquencies are dropping they remain high by
historical standards and 1.4 million homes remain in foreclosure.
Delinquencies are still at 7.3 percent.
credit constraints brought about by the housing crash continue to
hamper homebuyers, the Joint Center says. Average credit scores for
conventional mortgages (720-730 range) caused credit to be denied for
both purchases and refinancing. African Americans were denied credit
in 2011 at a rate of 36.9 percent, compared to 14.0 percent for white
borrowers and around 24.4 percent for Hispanics.
involvement in lending for both single-family and multi-family
housing continues high with government-backed loans accounting for
roughly 90 percent of all originations in 2012. The GSEs and FHA
hold 44.5 percent of all multi-family mortgage debt.
(click chart below to enlarge)
Joint Center sees a stronger recovery hindered by weak income growth,
eroding wealth, and high debt levels. Median household income fell
1.5 percent from 2010 to 2011 to 8.1 percent below the 2007 peak and
6.7 percent below the 2001 level. The decline in income as true for
all age groups except those over age 65 and was the sharpest among
wealth is very uneven by ethnicity. The median worth of a white
homeowner in 2010 was $214,000, more than 2.5 times that of a black
homeowner and 2.8 times that of a Hispanic homeowner. Home values, a
prime factor in building household wealth, declined most dramatically
in the wake of the recession for non-white minorities. Hispanic
homeowners lost an average of $100,000 (35 percent) of real home
value between 2007 and 2010 and black homeowners saw their home
values plunge by 31 percent or about $69,000. By contrast, average
values for while homeowners fell just 15 percent in the same period.
are a growing part of the potential first-time homebuyer pool but
have fewer resources to draw on for a down payment. Among renters in
the 25 to 34 age group whites had median net wealth of $6,500 while
Hispanics had $4,400 and blacks only $1,400.
households are also burdened by student debt which increased by 39
percent between the beginning of 2005 and the end of 2012. Average
debt was $13,300 at the beginning of the period and $21,400 at the
end. Student loans are not just a problem for younger age groups.
Of the $600 billion increase in student loans outstanding over the
six years ended in 2012, fully 38 percent went to households over age
costs are burdening large numbers of households. In 2011 42.3
million or 37 percent of households paid more than 30 percent of
pre-tax income on housing costs and 20.6 million of those paid more
than 50 percent, i.e were severely cost burdened. These households
increased by 6.7 million between 2001 and 2011 and by 2.6 million
since the start of the recession. Severely burdened renters
increased in numbers by 2.5 million post-recession. These households
spend only about two-thirds as much on food, half as much on
clothing, and one fifth as much on health care as families living in
housing they can afford.
the same time the supply of housing units affordable to extremely low
income renters shrunk by 135,000 units between 2007 and 2011 and the
government assistance available to help with housing costs is
steadily diminishing. Funding for must federal programs has been
cut and the supply of subsidized rental housing is decreasing by
about 10,000 units per year. Thirty-five percent of residents in
federally assisted housing have a disability, 31 percent are over the
age of 62 and 38 percent are single-parent families.