RISMEDIA, July 6, 2010—(MCT)—While the housing market has seen hints of revival, it won’t fully recover until the job market rebounds, Harvard’s Joint Center for Housing Studies said recently.
In its annual State of the Nation’s Housing report, the center pointed to positive signs for housing demand, including low mortgage rates and more affordable home prices. But the risks to the market are also clear: high foreclosure rates, tight lending standards, tepid job creation and the recent expiration of the $8,000 federal tax credit for first-time home buyers.
“The question is, can housing stand on its own two feet without the benefit of the tax credit?” asked Eric Belsky, the center’s executive director. “Conditions are not particularly ripe for a turnaround, especially with the low level of job growth we’ve seen. The key to the strength of the housing recovery is job growth.”
But once the job market rebounds, Belsky said, demand for housing may return with surprising force, because there is so much pent-up demand. Prospective buyers began hanging back several years ago, first as home prices became unaffordable and then because they couldn’t get mortgages or worried about their job security.
In addition, over the longer term, the children of the baby boomers—another giant generation—are likely to create strong demand for housing as they come of age and create households of their own.
Additional results of the annual study include:
-Although home values have declined an estimated 30% nationwide since their peaks in 2006, millions of U.S. households are forced to spend half or more of their incomes on housing, in part, because incomes have stalled and unemployment has soared.
-Fewer new homes were started last year than in any year since World War II. Gary Garczynski, a Virginia builder who is chairman of the National Housing Endowment said banks are still not lending money to builders.
-More than 11 million homeowners (about a quarter of those with mortgages) owe more on their mortgages than the home is worth.
-Americans’ mobility has plummeted because so many families can’t sell their homes for enough to cover their mortgages.
-More than 2 million loans are in the foreclosure process nationwide, quadruple the number just three years ago. And government efforts to help households facing foreclosure have fallen short of expectations, in part because many distressed homeowners have lost their jobs.
-On a more positive note, low mortgage rates and declining home values mean that houses are at their most affordable levels in decades.
That growing affordability will help spur demand for housing, Belsky said. Once potential home buyers feel more confident in their job security and see signs that home prices have stopped declining, they will jump into the market, he said.
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