Realtor Coaching & Training: Harvard
Excellent breaking news from Inman News Features about a new Harvard study about housing. Credit to Inman for this excellent reporting.
Conditions that could support a housing recovery are taking shape now, but job losses, falling home prices and tight lending standards mean demand for housing remains “remarkably low,” according to a new Harvard University report out today.
Home-price declines and low interest rates have restored housing affordability in many markets, and a dramatic reduction in home construction should eventually improve the balance between housing supply and demand, the 2009 State of the Nation’s Housing Report from the Joint Center for Housing Studies of Harvard University concludes.
Sales of distressed properties, temporary first-time buyer tax credits, and low interest rates have helped stabilize sales. But as homes continue to enter the foreclosure process in record numbers, the number of vacant housing units for rent, sale or being held off the market is at record highs, putting pressure on prices.
“We do see some signs of stabilization, more in home sales and less so in prices,” said Nicolas Retsinas, director of the Joint Center. “The macro forces pushing back against recovery include job losses and foreclosures, which are adding to inventory and motivating sellers to keep lowering their prices.”
The report estimates 5.7 million jobs were lost between December 2007 and April 2009, and another 11 million Americans were working part time involuntarily or had stopped looking for work altogether. Gains in homeownership rates made during the boom have been erased, falling from 69 percent in 2004 to 67.8 percent last year, a level last seen in 2001.
Although housing is becoming more affordable now, the report also noted that the number of households paying more than half their incomes for housing jumped from 13.8 million in 2001 to 17.9 million in 2007.
How prospective buyers respond when home prices stop falling and the economy improves will determine whether and when the homeownership rate turns up again, the report said. In the near term, demographic forces favor the rental over the for-sale market.
But the opportunity to snag a home at a bargain price could lure many to buy homes, even if credit remains relatively tight. Challenges to be overcome include reviving mortgage lending that lacks federal guarantees, moving Fannie Mae and Freddie Mac out of conservatorship, and overhauling regulations to avoid a repeat of the market meltdown, the report said.
In the long run, immigration and demand for housing by “echo boomers” could improve the balance between supply and demand.
Echo boomers are entering their peak household formation years of 25–44 with more than five million more members than the baby boomers had in the 1970s, the report said, which should help keep demand strong for the next 10 years and beyond and bolster markets for rentals and starter homes.
A deep, prolonged recession is likely to suppress immigration, the report said, so household growth could total as much as 14.8 million between 2010 and 2020, or remain closer to the 12.5 million total seen from 1995 to 2005.
But even the report’s more conservative assumption for immigration would result in minorities fueling 73 percent of household growth from 2010 to 2020, with the minority share of households projected to increase from 29 percent in 2005 to 35 percent in 2020.
Source: Inman News Features.
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Coach Jon just sent me this AP article to post. This article does a fantastic job explaining what has happened to all the money that has been lost from our economy…
NEW YORK – Trillions in stock market value — gone. Trillions in retirement savings — gone. A huge chunk of the money you paid for your house, the money you’re saving for college, the money your boss needs to make payroll — gone, gone, gone.
Whether you’re a stock broker or Joe Six-pack, if you have a 401(k), a mutual fund or a college savings plan, tumbling stock markets and sagging home prices mean you’ve lost a whole lot of the money that was right there on your account statements just a few months ago.
But if you no longer have that money, who does? The fat cats on Wall Street? Some oil baron in Saudi Arabia? The government of China?
Or is it just — gone?
If you’re looking to track down your missing money — figure out who has it now, maybe ask to have it back — you might be disappointed to learn that is was never really money in the first place.
Robert Shiller, an economist at Yale, puts it bluntly: The notion that you lose a pile of money whenever the stock market tanks is a “fallacy.” He says the price of a stock has never been the same thing as money — it’s simply the “best guess” of what the stock is worth.
“It’s in people’s minds,” Shiller explains. “We’re just recording a measure of what people think the stock market is worth. What the people who are willing to trade today — who are very, very few people — are actually trading at. So we’re just extrapolating that and thinking, well, maybe that’s what everyone thinks it’s worth.”
Shiller uses the example of an appraiser who values a house at $350,000, a week after saying it was worth $400,000.
“In a sense, $50,000 just disappeared when he said that,” he said. “But it’s all in the mind.”
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Though something, of course, is disappearing as markets and real estate values tumble. Even if a share of stock you own isn’t a wad of bills in your wallet, even if the value of your home isn’t something you can redeem at will, surely you can lose potential money — that is, the money that would be yours to spend if you sold your house or emptied out your mutual funds right now.
And if you’re a few months away from retirement, or hoping to sell your house and buy a smaller one to help pay for your kid’s college tuition, this “potential money” is something you’re counting on to get by. For people who need cash and need it now, this is as real as money gets, whether or not it meets the technical definition of the word.
Still, you run into trouble when you think of that potential money as being the same thing as the cash in your purse or your checking account.
“That’s a big mistake,” says Dale Jorgenson, an economics professor at Harvard.
There’s a key distinction here: While the money in your pocket is unlikely to just vanish into thin air, the money you could have had, if only you’d sold your house or drained your stock-heavy mutual funds a year ago, most certainly can.
“You can’t enjoy the benefits of your 401(k) if it’s disappeared,” Jorgenson explains. “If you had it all in financial stocks and they’ve all gone down by 80 percent — sorry! That is a permanent loss because those folks aren’t coming back. We’re gonna have a huge shrinkage in the financial sector.”
There was a time when nobody had to wonder what happened to the money they used to have. Until paper money was developed in China around the ninth century, money was something solid that had actual value — like a gold coin that was worth whatever that amount of gold was worth, according to Douglas Mudd, curator of the American Numismatic Association’s Money Museum in Denver.
Back then, if the money you once had was suddenly gone, there was a simple reason — you spent it, someone stole it, you dropped it in a field somewhere, or maybe a tornado or some other disaster struck wherever you last put it down.
But these days, a lot of things that have monetary value can’t be held in your hand.
If you choose, you can pour most of your money into stocks and track their value in real time on a computer screen, confident that you’ll get good money for them when you decide to sell. And you won’t be alone — staring at millions of computer screens are other investors who share your confidence that the value of their portfolios will hold up.
But that collective confidence, Jorgenson says, is gone. And when confidence is drained out of a financial system, a lot of investors will decide to sell at any price, and a big chunk of that money you thought your investments were worth simply goes away.
If you once thought your investment portfolio was as good as a suitcase full of twenties, you might suddenly suspect that it’s not.
In the process, of course, you’re losing wealth. But does that mean someone else must be gaining it? Does the world have some fixed amount of wealth that shifts between people, nations and institutions with the ebb and flow of the economy?
Jorgenson says no — the amount of wealth in the world “simply decreases in a situation like this.” And he cautions against assuming that your investment losses mean a gain for someone else — like wealthy stock speculators who try to make money by betting that the market will drop.
“Those folks in general have been losing their shirts at a prodigious rate,” he said. “They took a big risk and now they’re suffering from the consequences.”
“Of course, they had a great life, as long as it lasted.”
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