It’s one thing when special interests declare “the end” of the housing debacle. But it’s another when such an august organization as the Joint Center for Housing Studies at Harvard University calls the bottom.
Even though the research center is basing its claim on data supplied from those very same interest groups, when managing director Eric Belsky says housing as entered “the early innings” of recovery, his statement rings with an air of authority.
That’s not to say the market isn’t still beset by problems, for it is. The latest edition of the Joint Center’s “State of the Nation’s Housing” calls them “challenges.” Among other things, that includes the roughly two million home backlog of houses trapped somewhere in the foreclosure process, which will serve to keep prices in check in places hit hardest by foreclosures.
And who can forget the 11 million or so owners who are drowning under a mortgage that is larger than the current value of their homes? These folks cannot sell without incurring a loss, and they have nothing in equity to borrow against to fund major home improvements. In other words, they are pretty much stuck until prices rise enough to float their boats.
Despite these and other issues, Belsky points out that rental markets have turned the corner, home sales are strengthening and that all-important “floor” is beginning to form under home prices. “With new home inventories at record lows,” the economist says, “unless the broader economy goes into a tailspin, stronger sales should further stabilize prices and pave the way for a pickup in single-family housing construction over the course of 2012.”
And even as sales are pick-up, so, too, is the rental sector on the mend, the Joint Center’s director adds. Thanks to sharp drops in construction and an increase of over 4.4 million renters since 2005, vacancy rates are falling, rents are increasing and multifamily construction is up “solidly.”
What the housing sector needs now is a good shot of job growth. A sustained increase in jobs would bring household growth back to its long-term pace “and spur demand,” says Chris Herbert, who directs research at the Harvard center. Last year alone, he points out, the 700,000 new households that were formed were “well below” the 1.2 million that could be expected under more normal economic conditions.
So as builders, lenders, contractors, suppliers and the myriad other professions which count on housing for their livelihoods wait, and wait some more, for a full-scale recovery to begin, they can take solace, as Belsky does, in the fact that survey after survey after survey finds that the overwhelming majority of young adults say they will eventually become home owners.
Right now, says Belsky, they’re on the sidelines, waiting for the job market to improve and prices in their locations to stop falling. But, if the markets continue to tighten as expected, he says, “these fence-sitters may begin to take advantage of today’s lower home prices and unusually low mortgage rates. With rents up, home prices sharply down, and mortgage interest rates at record lows, monthly mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s.”
