By Kathleen Lynn
RISMEDIA, June 30, 2009-(MCT)-The housing market has suffered a “massive shock” and faces a difficult recovery in the face of job losses, foreclosures and tight credit, according to a report released last week by Harvard’s Joint Center for Housing Studies.
“It’s difficult to overstate the challenges in the housing market today,” said Nicholas Retsinas, director of the center, who presented the annual State of the Nation’s Housing report in New York City. “While there are some positive signs in the marketplace, the macroeconomic forces are still overwhelmingly negative.”
The good news is that the bursting of the housing bubble has made real estate more affordable. And, looking over the next 10 years, the huge “echo boomer” generation will soon start establishing their own households in large numbers, increasing demand for homes.
In North Jersey and the rest of the New York metropolitan area, for example, homes have held their value better than in many regions of the nation as the housing bubble burst over the past several years. But price declines in the New York area have begun to accelerate, partly as a result of job cuts in financial services, a major economic engine for the region.
Eric Belsky, executive director of the housing center, said the home price declines are likely to continue in the area for some time – though they will not drop as much as in areas such as Florida, Nevada, Arizona and California, where developers overbuilt during the housing boom.
Because this area is already largely developed, and state and local governments tightly regulate construction, builders did not overbuild in North Jersey.
The report also said:
-Despite the drop in home prices, affordable housing is still out of reach for many Americans. The supply of homes built during the boom did not match the needs of working Americans, according to Sheila Crowley, head of the National Low Income Housing Coalition, who also spoke at Monday’s event. In addition, job losses have left many families struggling to pay for housing.
-Close to 4 million households have entered foreclosure since 2007. Foreclosures are at unbelievable levels,” Belsky said. That places an “enormous downward pressure on home prices,” he said, because foreclosed properties tend to sell at depressed prices.
-Builders have reduced home construction to 60-year lows. This cutback is reducing inventory, the first step in restoring the balance between supply and demand in housing. But demand remains extremely low; it’s as if builders saw “two out of every three customers disappear,” Belsky said.
-The national homeownership rate has dropped to 67.3%, erasing all the gains since 2000.
-The national median home price, adjusted for inflation, dropped by almost 30% from October 2005 – around the peak of the housing boom – to January 2009.
-As of March, more than 14 million households owned homes that were worth less than their mortgages.
-Private investors are shunning mortgage-backed securities. As of the first quarter of this year, almost all mortgages were bought or guaranteed by federal agencies.
©2009, North Jersey Media Group Inc.
Distributed by McClatchy-Tribune Information Services.
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