Quick Hit Ellyn Fortino Thursday June 27th, 2013, 1:27pm

Housing Costs Severely Burden Millions Of Americans, Reaches A Record High

The U.S. housing recovery is gaining traction due in part to an increase in multi-family housing construction and rising home prices, according to the annual State of the Nation’s Housing report released Wednesday by the Joint Center for Housing Studies of Harvard University.

Despite areas of improvement, the report found that millions of American homeowners are still late on mortgage payments or owe more than what their homes are actually worth, and low-income households face continued challenges finding affordable housing.

The number of Americans shouldering severe housing cost burdens has also set a new record, according to the report.

In 2011, 20.6 million households were spending more than 50 percent of their income on housing costs. That is an increase of 6.7 million households experiencing severe housing cost burdens since 2000.

Low-income homeowners and renters struggled the most to pay for housing, according to the report. Almost seven out of 10 households making less than $15,000 annually spent half of their income on housing in 2011. About 31 percent of households making $15,000 to $29,999 were also severely burdened by housing costs. And together, these two groups made up 74 percent of the overall household growth from 2000 to 2011.

As the number of extremely low-income renters grows, affordable housing has become harder to find. According to the report, there were 12.1 million extremely low-income renters in 2011, which is a 2.5 million increase since 2007. But only 6.8 million affordable units were available to those renters, which comes out to be 135,000 fewer units than in 2007.

And the report found that federal housing assistance is not keeping up with the growing number of extremely low-income renters. Federal subsides have made it to about a quarter of eligible households, according to the report.

The U.S. Department of Housing and Urban Development’s public housing system saw its funding slashed 12 percent between 2008 and 2012. Meanwhile, the HOME programCommunity Development Block Grant program, and Department of Agriculture’s Section 515 Rural Rental Housing Program all experienced massive budget cuts, ranging from approximately 26 percent to 45 percent budget cuts, between 2010 and 2012, the report noted.

Additionally, some 10,000 public housing units are being lost each year, according to the report's findings.

“Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities,” said Eric Belsky, managing director of the Joint Center for Housing Studies, in a statement.

But home prices are on the rise.

Every major home price index reported considerable increases last year. This March, the median home price was up 11.6 percent compared to the same time period in 2012. Nonetheless, existing home sales jumped 9.4 percent, totaling 4.66 million units from 2011 to 2012. There has not been an increase that large since 2003 to 2004.

In 2012, there were 368,000 new home sales, a 20 percent uptick from 2011, and the first year-over-year increase in seven years, according to the report.

And on the bright side, the first quarter of 2013 showed a slight improvement regarding loan delinquency rates. The portion of loans in some form of delinquency, but not yet in foreclosure decreased to 7.3 percent, according to the report. In comparison, 10.1 percent of loans in the first quarter of 2010 were in some stage of delinquency.

But even with the improvement, more than 1.4 million homes were in foreclosure at that time.

As a consequence of the Great Recession, the rental market has seen a significant bump. Specifically, from 2011 to 2012, the number of renter households increased by 1.1 million, which resulted in the construction of 245,300 new multi-family housing units last year. That’s a 37.7 percent jump in new multi-family construction from the previous year, as well as the second straight year of double-digits gains, according to the report.

But with the growing number of overall households looking to rent comes a continued dip in homeownership.

Last year marked the eighth year in a row that U.S. homeownership rates dropped. Homeownership rates in 2012 fell from 66.1 percent to 65.4 percent, which comes out to be a loss of 161,000 homeowners, according to the report. And in 2012, the 25 to 54 age group had the lowest homeownership rates since 1976 when recordkeeping first started, the report noted.

Also, African Americans' homeownership rate of 43.9 percent in 2012 was at its lowest level since 1995. Hispanics and whites also saw their lowest homeownership rates in a decade.

Tight credit is to blame for the decline in homeownership, the report's researchers said. Shrinking interest rates on 30-year fixed-rate mortgages dropped to 3.66 percent last year. But would-be homeowners are not able to secure the credit they need in order to take advantage of the lower interest rates, which have have resulted in more affordable mortgage payments compared to any other time in the previous four decades, the report reads.

“Tight credit is limiting the ability of would-be homebuyers to take advantage of today’s affordable conditions and likely discouraging many from even trying,” said Chris Herbert, director of research at the Joint Center for Housing Studies, in a statement. “At issue is whether, and at what cost, mortgage financing will be available to borrowers across a broad spectrum of incomes, wealth, and credit histories moving forward.”


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