by Felicia Kiefer
Despite signs of economic growth, the lack of improvement in the national and regional housing sector remains troubling, and in some cases, demoralizing. According to the 2011 State of the Nation's Housing report by the Joint Center for Housing Studies of Harvard University, the national homeownership rate continued to decline last year to a low of 66.9 percent, 2.1 percent below the 2004 peak. New home sales were down an additional 14 percent in 2010, contributing to the five-year double-digit decline.
According to the report, people are increasingly unable to afford homeownership costs. Foreclosures and Abandoned Properties
Owners lost an additional 3.5 million homes to foreclosure from 2008 through 2010. Foreclosures and low new home sale rates led to abandoned and vandalized homes. In 2009, 7.2 million households reported at least one abandoned or vandalized home within 300 feet of their residences, an increase of 1.5 million households in only two years. This further depletes home values in the entire neighborhood.
The number of homes sold for less than their purchase prices climbed from 25.4 percent in 2009 to 30.7 percent in 2010. Usually in hard economic times, residential construction aids in recovery; however, in this cycle, residential construction is dragging GDP growth down. The Burden of Homeownership
Households with real incomes under $15,000 are finding it especially difficult to afford homeownership. Among them, 66.4 percent spent more than half their incomes on housing in 2009, an increase of 4.8 percentage points from 2001. High housing costs are not only affecting the poor, but also those with household incomes of $30,000 to $45,000.
There was a 4.2 percentage-point increase in the number of middle-income households that were severely burdened by housing costs, bringing the share to 11.5 percent. Even the number of households with incomes of $45,000 to $60,000 that spent more than half of their income on housing nearly doubled to 6.4 percent in the last nine years.
In addition, homeownership rate declines for black (3.8 percentage points) and Hispanic households (2.1 percentage points) have outpaced those for white households (1.5 percentage points), erasing most of the improvement in the white-minority homeownership rate gap made over the last two decades. The Rental Housing Market
As a likely consequence of unemployment and foreclosures, the home rental market is booming. Renter household growth has outpaced owner household growth for four consecutive years.
From 2006 to 2010, the number of renter households jumped by an annual average of 692,000, while the number of owner households fell by 201,000 annually. This is a complete reversal from the preceding decade and a half, when homeowners drove the vast majority of household growth and the number of renters stagnated. Decline in Household Growth
Influential in this is the fact that there has been a decline in the household growth rate since 2005, as 2 million fewer households formed in the last five years than if the pace of the first half of the 2000s had continued.
Immigrants, usually large contributors to household growth, experienced virtually no household growth from 2007 to 2010. Instead of forming new households and purchasing homes, these people are renting.
Minorities and single people, along with older and younger households, are the most likely to rent.
Even those who in the past might have typically been, or were, homeowners, such as families living in suburban communities, are now renting instead. Between the years 2007 and 2009, 1.4 million single-family homes switched to rentals; this is nearly double the number between 2005 and 2007.
In fact, more than half of renters live in suburban and non-metropolitan areas, with two out of every five renters living in suburban areas and about one in seven in non-metro areas.
In addition, more than half of all rental units are in buildings with four or fewer units, including 34 percent that are single-family homes.
Even in urban areas, nearly half of rentals are in structures with four or fewer units. Details:
To learn more about NLC's Center for Research and Innovation's work on housing issues, contact James Brooks at email@example.com
. Future articles will include a look at the consequences of an increase in rental demand and a continued look at the cost of housing.