'The State of the Nation’s Housing' reveals complicated picture

The State of the Nation’s Housing is, in a word, complicated.

Housing markets are showing signs of reviving, concluded "The State of the Nation’s Housing" report released by the Cambridge, Mass.-based Joint Center for Housing Studies of Harvard University. But we’re not out of the woods, yet. 

“While still in the early innings of a housing recovery, rental markets have turned the corner, home sales are strengthening, and a floor is beginning to form under home prices,” said Eric Belsky, managing director of the Joint Center for Housing Studies.  “With new-home inventories at record lows, 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.” 

Rental markets are on the mend thanks to sharp drops in construction and an increase of over 4.4 million renters since 2005.  Rental vacancy rates are falling, rents are increasing, and multi-family construction is up solidly. In contrast, the nation’s homeownership rate continues to slide.

“Surveys consistently find that the overwhelming majority of young adults plan to own a home in the future, but many would-be buyers have stayed on the sidelines waiting for the job outlook to improve and house prices to stop falling,” Belsky said.  “But as markets tighten, 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.”

Chief among the statistical analysis running through the report is the idea that owner-occupied market is seeing signs of recovery. Sales of newly constructed homes in the first quarter of 2012 were up 16.7% from the previous year -- this after a record low of just 306,000 in 2011.

In 1990, the NAR Affordability Index stood at 108.1. In 2011, it jumped up to 186.1.

The report also points to headwinds:

• Upwards of 2.0 million homes are in some stage of foreclosure in early 2012;
• Real net household wealth fell $14.3 trillion from 2006 to 2011, dragged down by a 57% drop in housing wealth; and
• 33% of the National Association of Realtors’ member brokers reported contract failures in December 2011, compared with just 9% a year earlier. 

The 40-page report covers the yin and yang of home prices and housing affordability, and cautions that the homeowner market faces numerous challenges. The report begins with the sentence: “After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery.”