The “State of the Nation’s Housing“ Report for 2011 by the Joint Center for Housing Studies of Harvard University does not paint a very pretty picture of the housing market, nor does it give us a whole lot to look forward to with regard to the near-term future of the U.S. housing market.
A recovery teaser…
The report points out the early 2011 saw some of the ingredients for a housing recovery, such as employment growth, increased consumer spending and improvement in vacancy rates of rental markets, however, this had little impact on the housing market which, during the first quarter of 2011, saw new home sales drop to record lows and home prices continue to fall as well.
Landlords faring well; at the expense of home-ownership…
One of the things I found interesting, and concerning, is the shift in the rental and owner markets. According to the report, 1.4 million single family homes shifted from owner-occupied to rentals from 2007 through 2009, nearly double the number from 2005 – 2007, however rental vacancy rates have declined from their 2008 peak which shows we have a lot of former homeowners that are now tenants and absorbing the increased supply of rental housing. This is good for investors and that segment of the housing market, however, at the same time, the other side of the coin is that the rate of home ownership dropped below 67 percent in 2010, down from 69 percent in 2004 and, according to the report, will likely drop even further in 2011 given the “foreclosure wave is still cresting”.
First time homebuyers are the key to recovery…
The report says first-time homebuyers are “key to a strong recovery in the homeowner market.” The increased home sales and home prices that we saw take place at the expiration of the home-buyer tax credit programs in 2009 and 2010 are given as proof of the how first time homebuyers can drive the market. Unfortunately, this raises the question is whether, without tax credits or other incentives to motivate them, will they buy?
Plan B; Make Babies…
Calling it “most critical” to a housing recovery, household growth is another thing that the report says can drive us from the housing doldrums we’re in to a recovery. So, if you really care about a housing recovery make some babies!
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