"After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery," reads the opening line of a housing study released today by Harvard.
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"After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery," reads the opening line of a housing study released today by Harvard.
According to "The State of the Nation's Housing," rental markets have turned the corner, home sales are strengthening and a floor is "beginning to form" under home prices. "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," said Eric Belsky, managing director of Harvard's Joint Center for Housing Studies, which conducted the study.
As further evidence of a recovery, the researchers said rental markets are on the mend as a result of sharp drops in construction and an increase of over 4.4 million renters since 2005. In addition, rental vacancy rates are falling, rents are increasing, and multifamily construction is up solidly.
The bad news is that the nation's homeownership rate continues to slide, according to the report. "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.
There are a number of factors working against homeowners, according to the report. There is a backlog of roughly two million homes in the foreclosure process keeping distressed sales elevated, which is dogging price increases in places hardest hit by foreclosures. Also, growth may remain muted due to the more than 11 million "underwater" homeowners who owe more on their mortgages than their homes are worth. Further, these homeowners cannot sell without incurring a loss and, as a result, have no home equity to borrow against to fund major remodels.
"What the housing sector needs is a sustained increase in jobs to bring household growth back to its long-term pace and spur demand," said Chris Herbert, director of research at the Joint Center for Housing Studies.