By Eugene T. Lowe
July 14, 2003

Conference President Hempstead (NY) Mayor James A. Garner commended Harvard University for another "excellent report on the State of the Nation's Housing" during a news conference on June 17 at the Ford Foundation in New York City. The report, conducted by Harvard's Joint Center for Housing Studies, has been released annually since 1988, and is an important resource in the development of housing policy. This year's report analyzed housing trends in five areas: Housing and the Economy; Demographic Demand Drivers; Homeownership Trends; Rental Housing; and Housing Challenges.

The report's major conclusion was that "by most measures 2002 was the strongest year for housing on record." Moreover, a press release from the Joint Center for Housing Studies said that "when the economy regains momentum and the lingering effects of the recession subside, housing will be well-positioned for another solid decade."

Garner said of the report's major conclusion: "We are pleased that this study documents the importance of housing to the growth of the nation's economy and that this will continue in the future. This is especially important to me because during my tenure as President of the Conference of Mayors, I will pursue the goal of sustainable development in our nation's cities. A strong economy, which is dependent upon housing, is very important to the goal of sustainable development."

Garner added: "As the report indicates, the underpinnings are in place to support another strong decade for housing. Last week at the Conference of Mayors annual meeting in Denver, we approved policy recommendations that we believe will support this continued growth in housing. We are calling for the immediate passage of a homeownership tax credit that will support investor-based single family homeownership that would encourage the development of affordable single family housing, help revitalize neighborhoods and increase homeownership for lower-income families. While we are strongly supportive of increased homeownership, especially minority homeownership, we are mindful that rental housing is a tremendous challenge to cities across the nation. In this regard, we have called for passage of a National Housing Trust Fund which would augment the resources of more than 275 local and state housing trust funds across the nation."

Other important findings of the report include:

• Cash taken out in the process of refinancing mortgages set records, pumping an estimated $97 billion back into the economy, and going to pay off another $70 billion. In addition, lower monthly mortgage payments on the rest of the refinancing activity injected $13 billion more into the economy. Already in 2003, refinances are on course to rival 2002 levels.
• Diversity increasingly shapes housing markets. Over this decade, minorities are expected to contribute fully two-thirds — and immigrants alone more than one-quarter — to the expected growth in households.
• The number of homeowners spending half their incomes on housing has increased (7.3 million in 2001, up from 5.8 in 1997).
• Expansion of credit since 1993 to homeowners with blemished credit histories has exposed a growing share of borrowers to default risks. The concentration of these subprime loans in low-income, especially minority, neighborhoods, has exposed some neighborhoods to mounting foreclosures.
• Though the percentage of conventional mortgages 90 days past due increased in 2002, the current percentage is under one half of one percent and well below previous peaks.
• Several years of strong home price appreciation have shored up the home equity positions of most homeowners — even those who put little money down when they bought or took cash out during a refinance. In addition, lower interest rates have kept mortgage debt payments down for most homeowners.
• Rental housing markets have softened in some areas and many landlords have begun to offer rent concessions. However, the softness is mostly associated with the weak economy and so should reverse when the economy recovers.

The report is available on the Joint Center for Housing Studies' website at www.jchs.harvard.edu. Users will be able to download the appendix tables as Excel files.