Tag Archives: housing recovery

Money Monday: Challenges Hamper the Housing Recovery

As the Housing Recovery Strengthens, Affordability and Other
Challenges Remain: Harvard Study

Source: Harvard

The national housing market has now regained enough momentum to provide an engine of growth for the US economy, according to The State of the Nation’s Housing report released this week by Harvard’s Joint Center for Housing Studies. However, several obstacles continue to hamper the housing recovery—in particular, the lingering pressures on homeownership, the eroding affordability of rental housing, and the growing concentration of poverty.for rent

Making sense of the story

  • On the renter side, the number of cost-burdened households rose by 3.6 million from 2008 to 2014, to 21.3 million. Even more troubling, the number with severe burdens (paying more than 50 percent of income for housing) jumped by 2.1 million to a record 11.4 million.
  • The national homeownership rate has been on an unprecedented 10-year downtrend, sliding to just 63.7 percent in 2015. Tight mortgage credit, the decade-long falloff in incomes that is only now ending, and a limited supply of homes for sale are all keeping households—especially first-time buyers—on the sidelines.
  • The report finds that income inequality increased over the past decade, with households earning under $25,000 accounting for nearly 45 percent of the net growth in US households in 2005–2015.
  • The report finds that rent burdens are increasingly common among moderate-income households, especially in the nation’s 10 highest-cost housing markets, where three-quarters of renters earning $30,000–45,000 and half of those earning $45,000–75,000 paid at least 30 percent of their incomes for housing in 2014.
  • Federal assistance reaches only a quarter of those who qualify, leaving nearly 14 million
    households to find housing in the private market where low-cost units are increasingly scarce.
  • Low-income households with cost burdens face higher rates of housing instability, more often settle for poor-quality housing, and have to sacrifice other needs—including basic nutrition, health, and safety—to pay for their housing.
  • The report notes that a lack of a strong federal response to the affordability crisis has left state and local governments struggling to expand rental assistance and promote construction of affordable housing in areas with access to better educational and employment opportunities.

Read the full story here. This concise intro to Harvard’s article is from the CALIFORNIA ASSOCIATION OF REALTORS.

Rise in Home Sales Signifies Strengthening Market

The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.

While admitting home sales “are still very low,” Paul Dales, chief economist at Capital Economics, says “it is clear that housing recovery is now well underway.”

The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.

Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales’ assessment, saying “The pattern of home sales in recent months demonstrates a market in recovery.”

Yun suggests consumers are gaining confidence from “record low mortgage interest rates, job growth and bargain home prices.”

In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.

Distressed homes made up 32 percent of sales in December, according to NAR’s existing home sales report for the month.
Foreclosed home sales closed at about 22 percent below market rate in December, a discount 2 percent higher than that recorded a year earlier.

Investor demand remains steady with 21 percent of homes sold in December going to investors after this category of buyers took 19 percent of purchases in November and 20 percent one year ago.

Cash sales – commonly linked to investors – made up 31 percent of December’s existing-home sales. This rate was 28 percent in November and 29 percent a year ago.

Purchases by first-time home buyers declined in December – both from the previous month and the previous year. First-time home buyers accounted for 31 percent of purchases in December, down from 35 percent in November and 33 percent in December 2010.

Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.

“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.

However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.

Regardless, Dales believes sales will rise this year. “Housing still won’t contribute much to GDP growth over the next few years, but at least it will no longer subtract from it,” Dales says.