The long, bumpy slide that began more than five years ago for the U.S. housing market is finally coming to an end, according to The State of the Nation's Housing report, released today by the Joint Center for Housing Studies of Harvard University. Short of a stomach-lurching double dip in the economy, stabilizing home prices should spur single-family housing construction throughout 2012, which will have a positive ripple effect throughout multiple sectors of the economy.
Among the most promising signs of recovery highlighted in the report:
•By the first quarter of 2012, year-over-year existing home sales were up 5.2 percent, with single-family sales up 6.3 percent. After hitting a record low of just 306,000 in 2011, sales of newly constructed homes stood 16.7 percent above year-earlier levels.
•With the uptick in sales, single-family housing starts picked up significantly in the second half of 2011 and are up 16.6 percent above year-earlier levels in the first quarter of 2012. Single-family permitting, a leading indicator of starts, was also up 16.9 percent.
Demographics also favor the housing market, albeit more in the longer term. The 84.7 million members of the echo-boom generation, the oldest of whom turned 25 in 2010, promise to be a primary driver of new household formations over the next two decades. "Surveys consistently find that the overwhelming majority of young adults plan to own a home in the future, but many would-be buyers have stayed on the sidelines waiting for the job outlook to improve and house prices to stop falling," says Eric S. Belsky, Managing Director of the Joint Center for Housing Studies. "But as markets tighten, these fence-sitters may begin to take advantage of today's lower home prices and unusually low mortgage rates."
For all the positive signs in the market, challenges persist, starting with a backlog of roughly two million homes in foreclosure. Those distressed properties could be a drag on prices in places hardest hit by foreclosures. Growth could also be stymied by the 11 million homeowners who are underwater on their mortgages, owing more than their homes are worth. But as the study concludes, "After several false starts, there is reason to believe that 2012 will mark the beginning of a true housing market recovery."