Joint Center for Housing Studies 

of Harvard University

Five Decades of Housing Rese

SINCE
Graduate School of Desig    Harvard Kennedy Scho

Principal funding for this report was provided by the Ford Foundatio

and the Policy Advisory Board of the Joint Center for Housing Studies.

Additional support was provided by

Federal Home Loan Bank

Freddie Ma

Housing Assistance Counci

National Association of Home Builder

National Association of Housing and Redevelopment Offici

National Association of Local Housing Finance Agenc

National Association of Realtor

National Council of State Housing Agencie

National Housing Conference

National Housing Endowmen

National League of Cities

National Low Income Housing Coalitio

National Multi Housing Council

Research Institute for Housing Amer

U.S. Green Building Counci

©2010 President and Fellows of Harvard College

The opinions expressed in The State of the Nation’s Housing 2010 do not necessarily

represent the views of Harvard University, the Policy Advisory Board of the Joint Center

for Housing Studies, the Ford Foundation, or the other sponsoring agencie

Joint Center for Housing Studies of Harvard University
Joint Center for Housing Studies of Harvard University

1 Executive Summa

Even as the worst housing market 

correction in more than 60 years 

appeared to turn a corner in 

2009, the fallout from sharply 

lower home prices and high 

unemployment continued. By 

year’s end, about one in seven 

homeowners owed more on 

their mortgages than their homes 

were worth, seriously delinquent 

loans were at record highs, 

and foreclosures exceeded two 

million. Meanwhile, the share of 

households spending more than 

half their incomes on housing was 

poised to reach new heights as 

incomes slid. The strength of job 

growth is now key to how quickly 

loan distress subsides and how 

fully housing markets recover.

THe Fledgling Reco

With the economy finally adding jobs and house prices down 

dramatically, two essential conditions for a sustained recovery 

in single-family starts and sales had fallen into place by spring 

2010. But even in mid-2009—well before employment growth 

turned positive—existing home sales had revived as bargain 

hunters snapped up distressed properties in some of the hardest-hit areas (Figure 1). According to the National Association of

Realtors®, more than a third of existing home sales last year—

about 1.8 million units—were short sales or foreclosures. 

Improved affordability for first-time homebuyers and a federal first-time buyer tax credit were vital to this early rebound. 

Indeed, even though tighter lending standards sapped some 

strength from the market, the increase in sales to first-time 

buyers drove all the gains in existing home sales in 2009. As a 

result of lower home prices and interest rates, mortgage payments on a median-priced home (assuming a 90 percent loanto-value ratio) dropped below 20 percent of median household 

income—the lowest level on records dating back to 1971. 

By the second quarter of 2009, new home sales began to pick 

up as well. While large in percentage-point terms, the gain 

through the third quarter was a modest 68,000 units (on a 

seasonally adjusted annual basis) from a base of just 338,000. 

Both new and existing home sales stalled again in the final 

quarter of the year and did not turn up until March 2010, 

sparked by another round of tax credit-supported homebuying and signs that labor markets were on the mend. 

Home prices also showed signs of stabilizing in the spring 

of last year, only to slide again in late 2009 and the first 

two months of 2010. In the nation as a whole, however, 

median home prices followed sales higher in March and 

April. But two major indices provide conflicting news about 

the direction of home prices. After sliding sharply for several months, the FHFA purchase price index turned higher 

in February and March, while the S&P/Case-Shiller index 

showed steady declines from September 2008 through the 
2 The State of the Nation’s Housing 

end of March 2010. Clear evidence of a home price recovery 

therefore had yet to emerge.

A number of other conditions are still weighing on the housing market. One of the biggest drags on the housing market 

is the high joblessness rate. With more than 7.8 million fewer 

establishment jobs than in December 2007, unemployment 

held at 9.9 percent in April 2010. If the past is any guide, the 

strength and sustainability of the housing recovery will depend 

most on the bounceback in employment growth (Figure 2).

Unfortunately, most economists predict that the unemployment rate will remain elevated as discouraged workers reenter 

the labor force amid slow gains in jobs. 

The overhang of vacant units for rent, for sale, or held off the 

market (including foreclosed homes) is another serious concern. Despite production cuts of more than 70 percent since 

2005, the overall vacancy rate hit a record in 2009. In addition, 

many current owners are effectively trapped in homes that are 

worth less than the amount owed on their mortgages. 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. 

Finally, although picking up steam in the spring 2010 buying 

season, home sales will have to weather the expiration of the 

federal homebuyer tax credit. When the first round of credits 

expired in fall 2009, there was a noticeable falloff in sales. This 

time, though, the improving labor market may be enough to 

avoid a similar dip. 

Barring an unexpected shock, mortgage interest rates 

should not be a major factor in either invigorating or undermining the recovery. Nonetheless, a one percentage point 

increase in mortgage rates would trim some of the recent 

affordability gains, while a comparable decrease would 

stimulate demand.

Homeowner Stresse

Even as home sales and homebuilding improved last year, the 

foreclosure crisis intensified as the lagged impacts of huge 

job losses spread to the broader prime market. According to 

First American CoreLogic, falling home prices left 11.2 million 

homeowners underwater on their loans—with no home equity 

and unable to tap traditional markets—as of the end of the 

first quarter of 2010. Indeed, Freddie Mac reports that total real 

home equity cashed out at refinancing dropped 25 percent in 

2009 and stood below $80 billion for the first time since 2000. 

For its part, the government has focused on trying to prevent foreclosures. Under the Home Affordable Modification 

Program (HAMP), the federal government initially allocated 

$75 billion for sustainable mortgage modifications in an effort 

to reach 3–4 million homeowners by 2012. As of April 2010, 

HAMP had made 1.5 million offers that resulted in 637,000 

currently active trial modifications and about 295,000 permanent ones. But even among those households able to qualify 

for this reduction in payments, the Treasury Department estimates that 40 percent will re-default. 

The federal government also allocated about $6 billion to the 

Neighborhood Stabilization Program to deal with foreclosed 

properties, plus another $2.1 billion to housing finance agencies in states hardest hit by unemployment and house price 

declines. Preventing the millions of foreclosed properties from 

sitting empty, rehabilitating units in need, and placing them 

in the hands of responsible new owners—either as occupants 

or landlords—will be costly and difficult. With tighter underwriting standards limiting the ability of low-income borrowers 

The Housing Market Struggled 

to Regain Ground Last Year

FIGURE 1

Percent Change

2005–9 2008–9

Lowest Quarter 

in 2009 to 2010:1

New Single-Family Sales -70.8 -22.7 5.7

Existing Single-Family Sales -26.1 5.0 8.6

Housing Starts -73.2 -38.8 16.6

Housing Completions -58.9 -29.1 0.0

Median New Single-Family Price -18.1 -6.3 2.0

Median Existing Single-Family Price -28.5 -12.1 0.0

Home Equity -56.6 -4.2 17.6

Mortgage Debt 5.6 -1.2 0.0

Residential Investment -57.6 -24.1 0.7

Owner Residential Improvements -19.6 -3.3 11.5

Notes: Percent change is calculated with unrounded numbers, with dollar values adjusted for inflation 

using the CPI-U for All Items. Starts and completions include single-family and multifamily units. 

Changes in home equity and mortgage debt are only through 2009:4.

Sources: US Census Bureau; National Association of Realtors® (NAR) ; Freddie Mac; Federal Reserve 

Board; Bureau of Economic Analysis. 
Joint Center for Housing Studies of Harvard University

to qualify for loans, only a significant expansion of funding 

will prevent many communities—particularly many lowincome minority neighborhoods where subprime loans were 

concentrated—from facing an uphill battle to restore housing 

markets to health over the next several years. 

The Lost D

After at least three decades of progress, real median household incomes will almost certainly end the 2000s lower than 

they started. At last measure, the median for all households 

was $49,800 in 2008, down from $52,400 in 2000. Even at their 

last cyclical peak in 2007, real median incomes were 1.2 percent below 2000 levels.

Meanwhile, household wealth ballooned through the middle of the decade but ended about where it had started at 

around $54 trillion. On a per household basis, however, real 

household wealth slid from $503,500 to $486,600 over the 

decade. While growth in stock wealth has already started to 

pick up, housing wealth will take a slower path to recovery. 

Indeed, despite some painful foreclosure-driven deleveraging, mortgage debt has never been higher relative to home 

equity. After an $8.2 trillion plunge in housing wealth since 

the end of 2005, mortgage debt entered 2010 at 163 percent 

of home equity.

Household Growth Unkno

Despite all the attention paid to the recession’s impacts on 

household growth, it is difficult to judge how big those effects 

have actually been. All three major federal surveys indicate that 

household growth slowed substantially in the second half of the 

decade, but the estimates range widely (Figure 3). The low estimate puts the cumulative slowdown in household growth over

the last four years at 1.0 million while the high estimate indicates a drop of 2.8 million. The reality could, however, be even 

worse because household growth estimates depend heavily on 

net immigration, which is particularly difficult to assess in and 

around an economic recession. 

It is also challenging to sort out how much of the slowdown 

is due to reduced immigration and how much to lower household headship rates caused by doubling up. On the one hand, 

the Current Population Survey shows a much sharper decline 

in the number of foreign-born households under the age of 35 

from March 2007 to March 2009 (338,400) than in same-age 

native-born households (2,100). On the other, the survey also 

indicates that headship rates among young adults as a whole 

declined in the late 2000s, consistent with the expected effects 

of soaring unemployment within that age group. At the same 

time, the survey also shows some dropoff in headship rates in 

older age groups. 

Note: Changes are from a trough in new home sales through the first eight quarters of a sustained recovery.

Source: JCHS tabulations of US Census Bureau, New Residential Construction Survey; Bureau of Labor Statistics, 

Current Employment Statistics; and Freddie Mac, Primary Mortgage Market Survey.

Strong Employment Growth, More than

Falling Interest Rates, Has Been Critical

to Sustained Housing Recoveries

FIGURE 2

1982:2–1984:2 1974:4–1976:4 1991:1–1993:1

75

50

25

0

Change in New Home Sales (Percent)

6

4

2

0

1982:2–1984:2 1974:4–1976:4 1991:1–1993:1

Change in Employment (Percent)

0

-1

-2

-3

1982:2–1984:2 1974:4–1976:4 1991:1–1993:1

Change in Mortgage Rates (Percentage points)
4 The State of the Nation’s Housing 

In any case, headship rates may not remain depressed for 

long given dramatic improvements in affordability for firsttime buyers who have jobs, softening rents due to high rental 

vacancies, and the expectation that household growth will 

return to long-term trend levels when employment growth 

quickens. But assuming headship rates remain at their slightly lower 2008 levels and that net immigration recovers to its 

2000–5 pace, household growth will average about 1.48 million annually in 2010–20. Even if immigration falls to half the 

Census Bureau’s currently projected rate, household growth 

will still average about 1.25 million annually (Table A-7). Thi

low-end estimate puts household growth in the next 10 years 

on par with the pace in 1995–2005, and should support average annual housing completions and manufactured home 

placements of well over 1.7 million units. The higher-end estimate would likely support production exceeding 1.9 million 

units per year on average over the coming decade.

Diversity and Housing Deman

At last measure in 2007, minorities accounted for fully 35 

percent of first-time homebuyers and 20 percent of repeat 

buyers even in the middle of the housing bust. The immigrant share of first-time buyers was 19 percent and of repeat 

buyers 12 percent. The increasing presence of minorities and 

the foreign born in the rental market is even more striking. 

From 2000 to 2009, rapid growth of Hispanic households 

helped to lift the total minority share from 39.3 percent to 

45.1 percent.

Even if immigration ground to a halt today, past inflows and 

higher fertility rates ensure that minorities and the foreign 

born will increasingly drive growth in housing demand. 

Both the echo-boom generation (born 1986–2005) and the 

so-called baby-bust generation (born 1966–85) already have 

much larger minority shares than the baby-boom generation 

(Figure 4). The sheer size of these generations—with the baby

bust heavily augmented by the foreign born, and the even 

larger echo boom just now reaching the ages when immigrants will bolster its ranks—points to strong household 

growth in the years ahead. 

In 2009, minorities accounted for 37 percent of householders 

aged 25–44 and 39 percent of those under age 25. Even under 

the Census Bureau’s zero-immigration scenario, the minority 

share of the working-age population aged 25–64 would thus 

rise from 29 percent in 2000 to just under 35 percent in 2020. 

Importantly, minority households have lower median incomes 

than white households. For example, the median income for 

35–44 year-old minority-headed households was $45,000 in 

2008, compared with $72,900 for whites. The gaps in personal 

income are even wider. If these disparities persist and overall 

income growth among younger generations remains weak, the 

social security system will come under increasing pressure as 

the baby boomers enter retirement. 

The oldest baby boomers are just turning 64, with millions 

soon to follow. Indeed, the number of persons aged 55–64 

rose by 10.4 million over the past decade—a 42.8 percent 

increase compared with total population growth of just 9.4 

percent. Despite their losses in wealth caused by the correction in home and stock prices, the baby boomers will drive 

demand for senior housing suited to active lifestyles as well 

as for assisted living facilities. 

Policy Priorities

As the nation looks forward to a housing recovery, homeowners and renters alike are under duress. When home prices 

move consistently higher, some of the equity that owners lost 

over the last decade will be restored. But rising prices will also 

put additional strain on the already large number of households with daunting affordability challenges. Tackling these 

issues while leveraging the potential of housing to anchor 

neighborhood revitalization and achieve energy savings will 

be national priorities in the decade ahead. 

� 2000–5 � 2005–9 � Average Annual Slowdown

Notes: ACS estimates are from 2005 to 2008 only. To adjust for rebenchmarking, CPS 

and HVS estimates for 2002–3 are assumed to equal the average in 2000–5. 

Sources: US Census Bureau, American Housing Survey; Current Population Survey; 

and Housing Vacancy Survey.

1.50

1.25

1.00

0.75

0.50

0.25

0.00

-0.25

-0.50

-0.75

American Community

Survey

Current Population

Survey

Housing Vacancy 

Survey

Household Growth Has Clearly Slowed, 

But Estimates of the Degree Vary Widely

Average Annual Household Growth (Millions) 

FIGURE 3
Joint Center for Housing Studies of Harvard University

All told, 40.3 million households spent more than 30 percent 

of their incomes on housing in 2008, while 18.6 million of 

these households spent more than half—up from 13.8 million 

in 2001. Of those with such severe housing cost burdens, fully 

45.1 percent are renters in the bottom income quartile. Indeed, 

many householders 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 (Figure 5)

Meanwhile, the acute housing affordability problems of very 

low-income renter households (with incomes half or less of 

area medians) has long been a focus of national housing policy. Yet despite federal support for rental assistance of about 

$45 billion per year, only about one-quarter of eligible renter 

households report receiving housing assistance. 

Efforts to impose fiscal austerity may take a toll on programs 

to cope with these challenges. President Obama’s FY2011 

budget trimmed US Department of Housing and Urban 

Development funding by 5 percent, although an additional 

$2.2 billion was shifted into core rental assistance programs, 

yielding a net increase in the number of needy households 

served (Table W-5). Attention has also begun to focus on making the rental housing system more efficient and to placin

the public housing stock on more secure footing by tying rents 

and rent increases to the market. In addition, HUD is extending revitalization efforts beyond distressed public housing by 

incorporating non-housing investments and by coordinating 

with other programs and services to achieve better employment, health, and safety outcomes for residents.

Also underway are efforts to reduce the nation’s energy 

consumption and carbon footprint through improvements 

to the housing stock. In 2009, the American Recovery and 

Reinvestment Act extended energy efficiency tax credits for 

homeowners and funded low-income home weatherization 

programs. Longer-term federal commitments include HUD’s 

new Sustainable Communities Initiative to encourage more 

energy-efficient and transit-friendly development patterns on 

a local level. Finally, homeowners and builders alike continue 

to make homes more energy efficient, led by regional certification programs as well as national green building standards. At 

stake are potentially large savings in the energy consumed to 

heat and cool homes, as well as in the number of vehicle miles 

traveled and related carbon emissions.

� Owners � Renters

Notes: Working-age households are aged 18-64. Minimum wage is $7.25 per hour. Full-time 

minimum wage job equivalent income is based on working 35 hours per week for 50 weeks. 

Households with severe cost burdens spend more than 50% of pre-tax income on housing.

Source: JCHS tabulations of US Census Bureau, 2008 American Community Survey.

Household Income

50

40

30

20

10

0

1–2x Minimum Wage 2–3x Minimum Wage

Even Households Earning Multiples of the 

Minimum Wage Cannot Afford Housing

Share of Working-Age Households with Severe Cost Burdens, 2008 

(Percent) 

FIGURE 5

Note: Members of the echo-boom generation are aged 5–24 in 2010; the baby-bust generation are aged 25–44; 

and the baby-boom generation are aged 45–64.

Source: JCHS tabulations of US Census Bureau, Current Population Survey.

85

80

75

70

65

60

55

50

50

40

30

20

10

0

Baby Bust

Echo Boom Baby Bust Baby Boom

Echo Boom Baby Boom

The Generations Following the Baby Boomers 

Are Large and More Diverse

FIGURE 4

Number of People in 2009 (Millions)

Minority Share of Generation in 2009 (Percent)