| The Joint Center for Housing Studies is Harvard University's :
Executive Summary
Housing markets stood up well in 2000 despite growing uncertainty about the direction of the economy. After years of rapidly rising rents and home prices, however, housing affordability remains the greatest concern. While current property owners clearly benefit from this price inflation, prospective homebuyers must come up with more money to make even small downpayments, while renters have to shoulder mounting housing costs. Indeed, nearly one in four owners and four in ten renters now spend at least 30 percent of their income on housing.
Housing's Unexpected Strength
Compared with previous economic slowdowns, the housing sector has so far remained strong (Figure 1). At the end of 2000, starts were down just 4 percent and residential fixed investment a mere 0.5 percent. Both home prices and rents rose faster than general inflation, while homeownership rates set yet another record of 67.4 percent. Thanks to falling interest rates through the first quarter of 2001, the pace of home sales and refinances also picked up.
The number of homeowners has grown by 8.1 million since 1994¡ªa record increase for a six-year period. Homeownership rates have risen for all income, racial, and ethnic groups, with minorities experiencing the fastest growth. Even so, the homeownership gap narrowed only slightly in 2000, with the white rate standing at 73.8 percent and the minority rate at 48.1 percent. While residential fixed investment showed only a modest decline in 2000, the number of homes built did drop in most markets. Eight states¡ªincluding such major markets as New York, California, and Georgia¡ªposted a rise in housing permits last year, but fully half registered at least a 10 percent retreat. For the nation as a whole, multifamily starts were flat and single-family starts were down by five percent. The correction in the manufactured home segment left shipments off 28 percent and placements down 17 percent.
Concerns about the continued robustness of housing markets and the sustainability of homeownership gains are, however, mounting. A more severe or prolonged downturn in the economy that results in additional job losses would place more pressure on the many households that are already stretching to pay for housing. Moreover, with a growing number of homebuyers making downpayments of five percent or less and relying on two incomes to make their monthly mortgage payments, a full-blown recession could leave many borrowers at risk of default. |
