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Household Formation a Function of Immigration & Employment
Posted to:
MND NewsWire
Wednesday, September 29, 2010 2:26 PM
The Joint Center for Housing Studies at Harvard University has issued
its annual report on the State of the Nation's Housing. The 2010 version focuses on housing up to the
end of the first quarter of 2010 which, in today's volatile market makes much
of what it says not only old news, but largely irrelevant.
The report charts the on-off, up-down nature of the recovery as it relates
to home sales, home prices, and delinquencies and foreclosures as well as public
efforts to assist the markets. What has not received as much attention from
other sources is the report's conclusions on household formation (headship
rates,) and income.
The report notes that, "after at least three decades of progress,
real median household incomes will almost certainly end the 2000s lower than
they started." The median income
for all households, which was $52,400 in 2000, had dropped to $49,800 by 2008. "Even at their last cyclical peak in
2007, real median incomes were 1.2 percent below 2000 levels."
At the same time, household wealth which ballooned during the middle of
the decade ended about where it had started, approximately $54 trillion. On a per household basis, however, real
wealth dropped from $503,500 to $486,600 over the decade. This was due both to a drop in stock values,
which is recovering and to housing wealth which will be slower to bounce back. In
spite of what the report calls "painful foreclosure-driven
deleveraging," mortgage debt is higher than it has ever been in relation
to home equity. "After an $8.2
trillion plunge in housing wealth since the end of 2005, mortgage debt entered
2010 at 163 percent of home equity."
While three major federal surveys, the American Community Survey,
Current Population Survey, and Housing Vacancy Survey indicate that household
growth, impacted by the recession, has slowed substantially in the second half
of the decade. The Joint
Center, however, says that the reality could be even worse because household
growth estimates depend heavily on net immigration which is difficult to assess
in a recession. The cause of the growth
slowdown is also hard to determine; is it due to reduced immigration or to
lower headship rates because families are doubling up.
The depressed headship rates, however, may not remain so for long given
the increased affordability of both homes for first-time buyers and rents, and
the report states an expectation that household growth will return to long-term
trend levels when employment also regains its footing. Even if immigration
falls to half the rate projected by the Census Bureau, household growth will
average about 1.25 units annually which would put growth over the next 10 years
on a par with 1995-2005. At the higher
end of immigration estimates there could be an annual increase of 1.9 million
households.
But, even if immigration ground to a halt today, the report says, past
inflows and higher fertility rates ensure that minorities and the foreign born
will increasingly drive growth in housing demand. In 2009, minorities accounted for 37 percent
of householders aged 25-44 and 39 percent of those under 25. Even in a zero-immigration scenario, the
minority share of the working age population will rise from 29 percent at the beginning
of the century to almost 35 percent in 2020.
Minority households, however, have lower median incomes than white
households - in the 35-44 year age group the differential is $45,000 vs.
$72,900. If these disparities persist
and overall income growth among younger people remains flat, the social
security system will come under increasing pressure as baby boomers enter
retirement age.
From a policy standpoint, the Center expects that, as housing recovers
homeowners and renters alike will suffer stress. While some lost wealth will return, rising
prices will put additional strain on households already experiencing
affordability challenges. 40.4 million
households spent more than 30 percent of their incomes on housing in 2008 and
for 18.6 million that figure was more than 50 percent. Of those with the most severe housing costs
burdens, nearly half are renters in the bottom income quartile. Many householders with incomes one to three
times minimum wage are still spending at least half their income on housing
and, despite federal support for rental assistance of about $45 billion per
year, only about one-quarter of eligible renter households report receiving any
housing assistance.
Although the Obama Administration cut the Department of Housing and
Urban Development budget by 5 percent, an additional $2.2 billion was shifted into
the core rental assistance program and attention has also begun to focus on
making the rental assistance system more efficient and putting housing stock on
a more secure footing by tying rents and rent increases to the market. HUD is also extending revitalization efforts
beyond public housing by incorporating non-housing investments and coordinating
with other programs to achieve better employment, health, and safety outcomes. There are also notable efforts in both
public and private sectors to improve the nation's housing stock so as to
increase energy efficiency
READ MORE...
Dramatic Increase in Home Overcrowding Observed Since Onset of Recession
Housing Supply vs. Housing Demand vs. Population Growth
The Dearth of Affordable Rental Housing
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Household Formation a Function of Immigration & Employment
Posted to:
MND NewsWire
Wednesday, September 29, 2010 2:26 PM
The Joint Center for Housing Studies at Harvard University has issued
its annual report on the State of the Nation's Housing. The 2010 version focuses on housing up to the
end of the first quarter of 2010 which, in today's volatile market makes much
of what it says not only old news, but largely irrelevant.
The report charts the on-off, up-down nature of the recovery as it relates
to home sales, home prices, and delinquencies and foreclosures as well as public
efforts to assist the markets. What has not received as much attention from
other sources is the report's conclusions on household formation (headship
rates,) and income.
The report notes that, "after at least three decades of progress,
real median household incomes will almost certainly end the 2000s lower than
they started." The median income
for all households, which was $52,400 in 2000, had dropped to $49,800 by 2008. "Even at their last cyclical peak in
2007, real median incomes were 1.2 percent below 2000 levels."
At the same time, household wealth which ballooned during the middle of
the decade ended about where it had started, approximately $54 trillion. On a per household basis, however, real
wealth dropped from $503,500 to $486,600 over the decade. This was due both to a drop in stock values,
which is recovering and to housing wealth which will be slower to bounce back. In
spite of what the report calls "painful foreclosure-driven
deleveraging," mortgage debt is higher than it has ever been in relation
to home equity. "After an $8.2
trillion plunge in housing wealth since the end of 2005, mortgage debt entered
2010 at 163 percent of home equity."
While three major federal surveys, the American Community Survey,
Current Population Survey, and Housing Vacancy Survey indicate that household
growth, impacted by the recession, has slowed substantially in the second half
of the decade. The Joint
Center, however, says that the reality could be even worse because household
growth estimates depend heavily on net immigration which is difficult to assess
in a recession. The cause of the growth
slowdown is also hard to determine; is it due to reduced immigration or to
lower headship rates because families are doubling up.
The depressed headship rates, however, may not remain so for long given
the increased affordability of both homes for first-time buyers and rents, and
the report states an expectation that household growth will return to long-term
trend levels when employment also regains its footing. Even if immigration
falls to half the rate projected by the Census Bureau, household growth will
average about 1.25 units annually which would put growth over the next 10 years
on a par with 1995-2005. At the higher
end of immigration estimates there could be an annual increase of 1.9 million
households.
But, even if immigration ground to a halt today, the report says, past
inflows and higher fertility rates ensure that minorities and the foreign born
will increasingly drive growth in housing demand. In 2009, minorities accounted for 37 percent
of householders aged 25-44 and 39 percent of those under 25. Even in a zero-immigration scenario, the
minority share of the working age population will rise from 29 percent at the beginning
of the century to almost 35 percent in 2020.
Minority households, however, have lower median incomes than white
households - in the 35-44 year age group the differential is $45,000 vs.
$72,900. If these disparities persist
and overall income growth among younger people remains flat, the social
security system will come under increasing pressure as baby boomers enter
retirement age.
From a policy standpoint, the Center expects that, as housing recovers
homeowners and renters alike will suffer stress. While some lost wealth will return, rising
prices will put additional strain on households already experiencing
affordability challenges. 40.4 million
households spent more than 30 percent of their incomes on housing in 2008 and
for 18.6 million that figure was more than 50 percent. Of those with the most severe housing costs
burdens, nearly half are renters in the bottom income quartile. Many householders with incomes one to three
times minimum wage are still spending at least half their income on housing
and, despite federal support for rental assistance of about $45 billion per
year, only about one-quarter of eligible renter households report receiving any
housing assistance.
Although the Obama Administration cut the Department of Housing and
Urban Development budget by 5 percent, an additional $2.2 billion was shifted into
the core rental assistance program and attention has also begun to focus on
making the rental assistance system more efficient and putting housing stock on
a more secure footing by tying rents and rent increases to the market. HUD is also extending revitalization efforts
beyond public housing by incorporating non-housing investments and coordinating
with other programs to achieve better employment, health, and safety outcomes. There are also notable efforts in both
public and private sectors to improve the nation's housing stock so as to
increase energy efficiency
READ MORE...
Dramatic Increase in Home Overcrowding Observed Since Onset of Recession
Housing Supply vs. Housing Demand vs. Population Growth
The Dearth of Affordable Rental Housing
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