Harvard housing report sees ‘eventual’ recovery

A sustained recovery for housing still faces an uphill climb, says Harvard’s Joint Center for Housing Studies in its annual report released yesterday.  To compare Harvard’s analysis with a variety of others, check out my forthcoming newsletter Friday afternoon.
“Although there are some signs of improvement or at least steadiness in new construction and sales, housing starts stand near 60-plus year lows, and any life in home sales is coming from distressed foreclosure sales, temporary first-time buyer tax credits and low interest rates that moved higher in recent weeks.” notes Center Director Nicolas P. Retsinas.  Adds Executive Director Eric S. Belsky: “The best that can be said of the market is that house price corrections and steep cuts in housing production are creating the conditions that will lead to an eventual recovery.  For now, markets remain under considerable stress.”

The Harvard University campus.

Meanwhile, the number and share of households spending more than half their incomes on housing continues to remain at elevated levels.

Before the economy began to shed jobs in 2008 and 2009, the report continues, the number of households with such severe cost burdens, in 2007, stood at 18 million, up from 14 million, in 2001.  Although renters are more cost burdened than homeowners, the most rapid growth in households with housing burdens, during the decade, occurred among owners.

Even though present housing challenges are “legion”—including still soaring foreclosures, millions of homeowners stuck in homes worth less than the amount they owe on their mortgage, and falling rental property values—the State of the Nation’s Housing report concludes that the demographic moorings of future demand remain strong.

This chart from Harvard's Joint Center for Housing says it all.

The unreadable key at the bottom left is titled "Year When First Quarter Prices Matched 2009 Levels." Purple is still appreciating in the Q1 2009; blue, 2007-08; grey, 2005-06; yellow, 2000-04; orange, 1990s.

The largest generation in American history will be reaching young adulthood in record numbers over the next decade.  As a result, even under a set of household projections that assume annual immigration falls some 40 percent below the average of the first half of this decade to just half of U.S. Census Bureau immigration projections, the report says household growth from 2010-2020 should still rival the solid performance in the 1995-2005 period. Even if immigration slows considerably, minorities will still account for about three-quarters of household growth.

With the echo baby boom driving demand for starter homes and apartments and the baby boom powering demand for homes suited to older Americans,” remarks Mohsen Mostafavi, dean of the Harvard University Graduate School of Design, “the design professions will be called upon to deploy new technologies and designs to meet the aesthetic tastes and functional needs of a new, more diverse younger generation on the one hand and a generation in need of home modifications to help them age more safely and healthfully in place on the other.”

Looking beyond the current turmoil, the report underscores the potential to reduce domestic energy consumption by making the existing housing stock more energy efficient and creating dynamic mixed-use communities.

Bringing the efficiency of the existing housing stock up to that of homes built since 2000 could save as much as 20 percent of residential energy consumption and more compact urban development could cut vehicle miles traveled substantially. Getting there will be a challenge, cautions the report, because local regulations often discourage compact and mixed use developments. Further incentives may be necessary to get property owners to invest in meaningful energy upgrades.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

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