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Housing is Back, but Not Owners
John Caulfield / BUILDER / June 26, 2013
Joint Center for Housing Studies report shows housing is bouncing back, but the question remains: are builders building to a market that is more imagined than real?
The long-awaited housing recovery finally may have arrived last year, but homeownership continued to decline, despite record-low interest rates and escalating home values. And while new-home construction is bouncing back, the question remains whether builders are building to a market that is more imagined than real in its growth potential.
Those are some conclusions Builder drew from the Harvard University Joint Center for Housing Studies’ “State of the Nation’s Housing 2013” report, its annual review of housing and ownership released Wednesday.
The Joint Center reports historically have offered a positive spin on housing’s future, and the 2013 edition is no different. Its touch points include steady growth in home sales and prices, low inventories of new homes, and a sharp rise in household formation to 980,000, all of which helped housing contribute to increases in residential fixed investment and the country’s economic expansion for the first time in five years.
“The housing sector has plenty of room to improve on last year’s contribution to economic growth,” which represented 0.3 percentage points of the GDP’s increase, the Joint Center wrote.
However, the center warned it could take “several years” for the housing sector to return to normal. (Coincidentally, Trulia’s chief economist Jed Kolko released Wednesday his monthly Housing Barometer for May, which estimates that the housing recovery was at 61% of pre-boom “normal” levels, based on starts, existing home sales, foreclosures, and delinquencies.)
Even during the housing recession, the Joint Center pointed optimistically to demographic trends that justify starting at least 1.2 million homes annually. But last year, builders started 535,300 single-family homes, half of the annual averages in the 1980s and 1990s.
For example, the Joint Center notes that between 2013 and 2023, households led by owners age 65 or older are expected to increase by nearly 10 million, and that the number of “mover” households age 65 or more will increase to 1.6 million per year, from an average of 1.2 million in previous decades. One intriguing factoid: from 1989 to 2010 the share of owners aged 60 to 69 with mortgage debt rose from 32% to 60%, while the median loan-to-value ratio among owners 50 to 59 years old rose from 10% to 38%.)