Job Growth Key To Housing Recovery

ically low mortgage interest rates and recovering labor markets should be enough to shore up sales and housing starts once an expected dip due to the expiration of the federal home buyer tax credit passes, according to the State of the Nation's Housing report, released Monday by the Joint Center for Housing Studies of Harvard University. ‘If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,’ says Eric S. Belsky, executive director of the 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." Unemployment held at 9.9% in April, representing more than 7.8 million fewer establishment jobs than existed in December 2007. Even if the recovery in sales and residential construction flourishes, the report warns, the adverse consequences of the recession and the financial crisis will linger. An estimated one in seven homeowners are in a negative-equity position, and nearly 5 million need their home prices to rebound by 25% before they are back above water. It will take time to work through the foreclosure inventory, the report adds. ‘[M]any current owners are effectively trapped in homes that are worth less than the amount owned on their mortgages,’ the report's executive summary reads. ‘If these distressed owners want or need to sell, their only choices are to walk away from their homes or write a check at the closing table. This will inhibit a recovery in repeat home sales.’ Despite falling home prices, loan modifications and softening rents, the downturn did not reduce the number of households spending half or more of their income on housing – which was 18.6 million in 2008. Instead, the share with such severe housing-cost burdens climbed to a new height. More than 40 million borrowers spent more than 30% of their incomes on housing in 2008, and the report says many households with incomes that are one to three times the full-time minimum wage equivalent still have to devote at least half their incomes to housing. SOURCE: [link=]Joint Center for Housing Studies of Harvard University


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