This post originally appeared in Stabilize, the blog of NeighborWorks America's Stable Communities Initiative.
The Joint Center for Housing Studies of Harvard University recently released its 2011 State of the Nation’s Housing report. The annual report identifies and analyzes demographic, economic and social trends that affect the housing industry, and is a must-read for thought leaders, policymakers, funders and practitioners.
Don’t have time to read it all now? Here are the 10 things we think you should know right away:
1. Recovery Good News
- With employment growth strengthening, consumer spending up, and rental markets tightening, some of the ingredients for a housing recovery were taking shape in early 2011.
2. Recovery Bad News
- Yet in the first quarter of the year, new home sales plumbed record lows, existing sales remained in a slump, and home prices slid. Tight underwriting requirements, on top of uncertainty about the direction of home prices, continue to dampen homebuying activity. The weakness of demand is slowing the absorption of vacant properties for sale, hindering the recovery.
3. The Rental Market is Tightening
- Conditions in the rental and owner markets have begun to diverge.
- Even with the net shift of 1.4 million single-family homes to rentals in 2007–9 (nearly double the number in 2005–7), rental vacancy rates have fallen and given a lift to rents and property values.
- The rental vacancy rate fell from 10.6 percent in the first quarter to 9.4 percent in the last, the lowest quarterly rate posted since 2003.
- With vacancy rates down, the pressure on rents is up. Nominal rents for professionally managed apartments were up 2.3 percent last year, recovering some of the ground lost in 2009.
4. The Homeownership Rate is Declining
- With an unusually large number of households leaving homeownership and an unusually small number of renter households buying homes, the national homeownership rate dipped below 67 percent in 2010, down from 69 percent in 2004.
- Given that the foreclosure wave is still cresting and would-be buyers are waiting for prices to firm, homeownership could continue to decline in 2011. The farther the homeownership rate falls, the longer it will take to work through the excess inventory of homes for-sale and held off market
5. Household Growth is Declining
- Even though the echo boomers (born 1986 and later)—the largest generation ever to reach their 20s—are entering their peak household formation years, household growth flagged during the late 2000s as more young adults delayed setting out on their own and growth in foreign-born households came to a halt.
- While estimates vary widely, the Current Population Survey indicates that household growth averaged about 500,000 per year in 2007–10. This is not only less than half the 1.2 million annual pace averaged in 2000–7, but also lower than that averaged in the 1990s when the smaller baby-bust generation entered the housing market.
6. The New Credit Environment is a Significant Obstacle to Would-Be Homebuyers and the National Recovery
- Many households still aspire to homeownership, but new underwriting standards are a significant obstacle.
- Even FHA-insured mortgage programs, one of the few places where lower down payments are available, have tightened requirements and raised costs.
- The combination of higher income, downpayment, and credit score requirements in today’s broader mortgage market will prevent many borrowers from getting the loans today that they would have qualified for in the 1990s before the housing boom and bust.
- “While a return to more stringent standards was clearly warranted, there is concern that overly rigid guidelines may unnecessarily restrict access of low- and moderate-income households to the benefits of homeownership.”
7. Nearly 4 Million Baby-Boomers Will Move to Smaller Homes
- The aging of the baby boomers (born 1946–65) is projected to drive up the number of households over age 65 by some 8.7 million by 2020—a 35 percent increase from 2010.
- One in three heads of households aged 65–74 in 2007 reported having moved in the previous 10 years, many to smaller homes. “If the older baby boomers match this mobility rate, some 3.8 million would downsize their homes over the coming decade, lifting the demand for smaller units.”
8. Minorities Will Make Up 70% of Net New Households 2010-2020
- Minorities will account for seven out of ten of the 11.8 million net new households in 2010–20.
- Hispanics alone will contribute nearly 40 percent of the increase.
- By 2020, minorities are expected to make up a third of all U.S. households. But with their lower average incomes and wealth than whites, more of these households will have to stretch to afford housing.
9. The Foreclosure Crisis Continues
- As of March 2011, about 2 million home loans were at least 90 days delinquent.
- Another 2.2 million properties were still in the foreclosure pipeline, with 67 percent of owners having made no payments in more than a year, and 31 percent having made no payments in two years.
- The crisis is especially acute in pockets across the country. Just 5 percent of census tracts accounted for more than a third of all homes lost to foreclosure since 2008.
- “It will take years for these neighborhoods—which are disproportionately minority—to recover from this calamity. As policymakers tackle the regulation and redesign of the mortgage market, it will be important to keep sight of the needs of these hard-hit communities.”
10. Affordability Problems Are Creeping Up the Income Scale
- Households earning between $45,000 and $60,000 saw the biggest increase in the share paying more than 30 percent of their incomes for housing, up 7.9 percentage points since 2001.
Of course, the beauty of the State of the Nation’s Housing report is in the detailed findings and sources it describes, so do try to read it soon. By following their sources, you can often find local data to compare to the national findings, giving your organization a jump-start on market or SWOT analysis, or a way to start a meaningful discussion with your board of directors about future direction.
What might these top-ten findings mean for your work?