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New York City -- The growth in homeownership and consumer spending linked to accumulated home equity was an important reason why the recent economic recession was so mild asserts The State of the Nation’s Housing: 2002, a report released today by The Joint Center for Housing Studies of Harvard University. “Last year alone, the housing sector set records for existing home sales (5.3 million) and the value of single-family construction ($206 billion), while price appreciation pushed the aggregate value of homes to a record high $12 trillion dollars and home equity to a record $6.7 trillion,” explains Nicolas P. Retsinas, Director of the Joint Center.
The report documents the strong demographic foundation of current and projected future housing market activity. According to the report, the housing sector is poised to set new records for production, sales, and aggregate home equity in the years ahead, as strong growth in immigrant and minority households will result in an expected 22 million increase in the number of homeowners and 1.6 million increase in renters over the next 20 years. Accounting for almost two-thirds of household growth, the report forecasts that minorities will constitute over half of all renters and a quarter of all owners by 2020.
Despite the overall robust assessment of housing market conditions, the report documents how mortgage defaults and foreclosures are on the rise among recent lower-income purchasers, especially those families who accessed new forms of higher-cost subprime mortgages to acquire a first home. The growing number of lowest-income borrowers with less than 5 percent equity, along with the increased use of high-cost mortgage products, may undo some recent homeownership gains and introduce new risks to the overall market.
“Just as was true with past recessions, increasing defaults and foreclosures are not only bad for individual families,” observes William C. Apgar, Joint Center Senior Scholar, “they also threaten to destabilize selected market areas by exerting downward pressure on home sales, production and eventually home prices.”
Equally problematic is what the report labels “the fraying safety net.” “The recent recession dealt a double whammy to nation’s nearly 20 million lowest-income families,” concludes Retsinas. “Growing unemployment and limited income growth, combined with rising home prices and rents, not only produced extreme affordability pressures, but the recession also undermined the capacity of state and local governments to provide much needed assistance. Little wonder there is a growing chorus of calls for expanded federal support for affordable homeownership and rental housing assistance.”
Harvard’s Joint Center for Housing Studies is the nation’s leading center for information and research on housing in the United States. Established in 1959, the Joint Center is a collaborative unit affiliated with the Harvard Design School and the Kennedy School of Government. Nicolas P. Retsinas has served as Director of the Joint Center for Housing Studies since 1998. Mr. Retsinas was previously Assistant Secretary for Housing-Federal Housing Commissioner at the U.S. Department of Housing and Urban Development and a member of the Board of Directors of the Federal Deposit Insurance Corporation. Apgar also served as Assistant Secretary for Housing-Federal Housing Commissioner and is now on the faculty of Harvard’s Kennedy School of Government.
Presentation and Press Conference in New York: The State of the Nation’s Housing: 2002 was presented and discussed Tuesday, June 25, at 11:00 AM at the Ford Foundation, 11th Floor Training Room, 320 East 43rd Street, New York, NY.