TURNING THE CORNER
“Housing has turned the corner of the worst downturn in more than 60 years,” accorrding to Harvard University’s Joint Center for Housing Studies “State of the Nation Housing 2010” report, which was released in mid June.
The report cautions however that the market is still grappling with high unemployment and sharply lower home prices, noting that the strength of job growth is now key to how quickly loan distress subsides and how fully markets recover.
“If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” says Eric Belsky, executive director of the Joint Center. “Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too.”
The study says first-time home buyers were responsible for the improvements that began to be seen by the middle of last year, triggered by improved affordability and the first-time home buyer tax credit.
“As a result of lower home prices and interest rates, mortgage payments on a median-priced home (assuming a 90% loan-to-value ratio) dropped below 20% of median household income — the lowest level on record dating back to 1971,” according to the center.
The report also notes that in April there were 7.8 million fewer jobs than in December 2007, and “unfortunately, most economists predict that the unemployment rate will remain elevated as discouraged workers reenter the labor force amid slow gains in jobs.”
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