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


Dramatic Increase in Home Overcrowding Observed Since Onset of Recession

Housing Supply vs. Housing Demand vs. Population Growth

The Dearth of Affordable Rental Housing