Pent-up housing demand needs spark of new jobs, study finds
The Hackensack Record
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 Monday.
In its annual State of the Nation's Housing report, the center pointed to positive signs for housing, 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 homebuyer.
"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."
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 then because they couldn't get mortgages or worried about their job security.
In addition, the children of the baby boomers — another giant generation — are likely to create strong demand for housing as they create households of their own.
The annual study also said:
• Although home values have declined an estimated 30 percent 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.
"Incomes simply aren't keeping up," said Dan McCue, an analyst at the housing center.
• 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.
Garczynski joked that if you asked a Magic 8-ball where housing is headed, it would say: "Ask again later."
• 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.
"It's very difficult to give enough help to a household that has no income," Belsky said.
• On a more positive note, low mortgage rates and declining home values mean houses are at their most affordable levels in decades.
That growing affordability will help spur demand for housing, Belsky said.
Once potential homebuyers feel more confident in their job security and see signs that home prices have stopped declining, they will jump into the market, he said.