According to The State of the Nation’s Housing 2011, from the Joint Center for Housing Studies (JCHS) of Harvard University, the signs of a broad recovery seen in early 2011 have weakened, with new and existing home sales still down and home prices dropping. “While the sharp declines in both home prices and interest rates have left homes in many places more affordable than they have been in decades,” said Eric S. Belsky, managing director of the Joint Center, in a press release, “stubbornly high unemployment and tightened lending standards have limited the ability of many first-time buyers to capitalize on the situation.”
The national homeownership rate in 2010 was 67%, down from 69% in 2004. With the foreclosure wave still cresting and would-be buyers waiting for prices to firm, homeownership rates could continue to decline in 2011, the report says. Overall, home prices dropped 4.1% in 2010, and existing home sales dropped 5.7%.
Youngsters and Boomers
Homeownership rates among younger households took the largest hit, with rates among 30- to 34-year-olds falling by 5.8% since the peak. High unemployment rates have kept some younger households from living on their own. The recession also affected immigration rates, which in turn, will affect the housing industry. After increasing by about 400,000 in 2004 to 2007, the total number of foreign-born households has been flat thereafter.
Baby boomers continue to have a strong impact on the housing market. The number of households with heads between the age of 55 and 74 is set to increase by 10.2 million from 2010 to 2020. As baby boomers age, the report says, most will choose to stay in their current homes or “age in place,” which may involve remodeling to make their living spaces more senior-friendly. Another group will downsize to smaller homes and/or move to single-level or elevator-accessed units.
Remodeling Activity Affected
Home improvement activity has also been slow, with real spending in 2010 up just 0.9% from 2009. Home sales are a driver of changes in remodeling expenditures. The Joint Center estimates that owners spend 2.5 times more on improvements in the first two years after buying homes than the average annual outlay of $2,500. So, slower home sales have meant lower remodeling spending. The slight increase in 2010 could be based on several factors, including owners choosing to remodel rather than move, owners’ desire to increase the efficiency of their homes, and federal tax credits for energy-efficient improvements. A JCHS survey indicates the share of remodelers that reported completing energy-efficient projects in the previous year increased from 84% in early 2009 to 97% in early 2011. The need to address deferred maintenance on properties that have gone through the long foreclosure process may also boost remodeling spending. The Home Improvement Research Institute reports that buyers of distressed homes spend an average of 14% more on home improvements within the first year of ownership than buyers of non-distressed homes.
The strength of the housing recovery, when it does occur, the report says, will be based on employment numbers. The first four months of 2011 brought promising news on the jobs front, with payrolls expanding by nearly 200,000 per month, on average.
“The ingredients for a sustained recovery may be coming together,” said Chris Hebert, research director of JCHS, in a press release, “but it is still not clear when home buyers will have the urgency to return to the market in sufficient numbers to lift the market in a meaningful way.”
The State of the Nation’s Housing is released annually by the Joint Center for Housing Studies. Click here to link to a copy of the 2011 report.
—Nina Patel, senior editor, REMODELING.