The worst housing downturn in generations continues to grind on, according to a study released last week by the Joint Center for Housing Studies of Harvard University. Despite some stabilization in homebuilding and home sales in the spring, real home prices continued to fall and foreclosures mount in most areas in the first quarter of the 2009. With mortgage interest rates heading higher in June and the economy still contracting, a sustained recovery for housing still faces an uphill climb, according to the report.”Although there are some signs of improvement or at least steadiness in new construction and sales,” says Nicolas P. Retsinas, director of the Joint Center, “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.”

Housing demand has withered under the weight of crushing job losses, house price deflation, and tighter credit standards, the report concludes. First-time homebuyers are struggling to meet today’s stricter underwriting guidelines, household growth is well below long-term trends, and immigration has slowed; as a result, the share of homes for sale and vacancies stand at near record levels despite sharp decreases in housing production.

“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,” adds Eric S. Belsky, executive director of the Joint Center. “For now, markets remain under considerable stress.”

The housing downturn hit low-income minorities especially hard, the report finds. With unemployment rates sharply higher among minorities, minority households are more likely than others to spend more than half of their incomes on housing. Also, higher shares of minorities live in neighborhoods with elevated foreclosure rates and where house prices fell the most.

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 number of households with such severe cost burdens, in 2007, stood at 18 million, up from 14 million, in 2001.

Even though present housing challenges are numerous-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 future demand remains strong.

“With the echo baby boom driving demand for starter homes and apartments and the baby boom powering demand for homes suited to older Americans,” says 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.”

The Joint Center for Housing Studies is a collaborative unit affiliated with the Harvard Graduate School of Design and the Harvard Kennedy School.


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