Homeownership Declines as Number of Renters Grow
By Charlene Crowell
Despite some signs of housing recovery America remains a nation burdened by high housing costs, according to a new report from Harvard University. The report, State of the Nation’s Housing 2012, finds some signs of recovery in the housing market in spite of continuing concerns about foreclosures and the border economy. Whether renting or buying a home, the number of households paying more than half of their incomes for housing now stands at 20.2 million.
“Recovery in the owner-occupied market could strengthen, if positive job numbers and tightening markets encourage more households to buy,” the report states. “Although young households have increasingly opted to rent in recent years, most still aspire to homeownership.”
Despite declining home sale prices and record low rates for mortgages, the nation’s housing trends show a marked increase in renters, not homeowners. Among homeowners, home equity now accounts for the smallest share of household wealth since 1945 when record-keeping began. Earlier this year, homeownership was at its lowest level since early 1997, dropping more than five percentage points for heads of households up to age 44 and slightly lower by 4.5 percentage points for those 45-54 years of age.
The nation has not seen the last of foreclosures. More than 2 million homes in early 2012 are in some stage of foreclosure. Nearly half of 2011 foreclosures were clustered in only 10 percent of the nation’s 65,000 census tracts.
Compared to recent years, foreclosures have slowed. For example, the number of completed foreclosures was down from 1.1 million in 2010 to 890,000 in 2011. However many imminent foreclosures were delayed in part as mortgage companies awaited the results of the recent mortgage settlement reached by the nation’s attorneys general. With several major lenders agreeing to the settlement terms, it is possible, if not probable, that the pace of foreclosures may speed up again.
These figures do not include the number of homeowners who now owe more than their home is worth. Today, more than one in five mortgage loans is underwater. Together, these loans represent $717 billion in negative equity.
In the meantime, the number of renters surged by 5.1 million during the 2000s, the largest decade-long increase in the post-war era. Moreover, households earning more than $75,000 contributed nearly 20 percent of the increase in renters from 2006-2011.
Other key findings include:
• After paying for housing, $619 was all that was left to cover monthly living expenses for severely cost-burdened, low-income families in late 2011;
• One in three 18-34 year olds lived with their parents in 2010, an increase of 1.95 million compared to 2006;
• In 2001, the nation’s shortage of affordable housing units stood at 2.4 million; by 2010, that shortfall more than doubled to 5.1 million housing units.
• The number of unemployed, severely-burdened households surged from 3.8 million in 2001 to 5.8 million by 2010.
The “State of the Nation’s Housing” is released annually by the Joint Center whose standing mission is to advance understanding of housing issues. This year’s findings echo an earlier housing report, “Housing Landscape 2012,” released by the Center for Housing Policy.
The earlier report noted the financial stress of the nation’s growing housing burden. After analyzing Census data on housing costs and incomes, the Center determined that housing affordability eroded in 24 states and now affects nearly one in four working households.
Chris Herbert, director of research at Harvard’s Joint Center for Housing Studies, said, “Even as the recovery takes hold in many markets across the country we cannot lose sight of the long-run challenge of providing affordable housing for the most vulnerable, nor forget the damage done to foreclosure-ridden neighborhoods, which will take years to heal.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.firstname.lastname@example.org.