Harvard Housing Report Mostly Glum

The U.S. housing market is in a deep pit with gooey clay walls and it's going to take years to claw its way out. That's the conclusion, in more metaphoric language, of Harvard's Joint Center for Housing Studies 2010 report on the state of the U.S. housing market released on Monday.

June 15, 2010
Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Patricia Drury

The U.S. housing market is in a deep pit with gooey clay walls and it’s going to take years to claw its way out. That’s the conclusion, in more metaphoric language, of Harvard’s Joint Center for Housing Studies 2010 report on the state of the U.S. housing market released on Monday. The report was leavened by only a few glimmers of good tidings for the market in the long run.

The problems for the market include persistent high unemployment; many too many vacant housing units, fed by banks’ appetite to kick ’em out if they can’t pay, don’t talk to me about modifications; the fact that people in their ’20s, who have been slammed especially hard by the recession, are wary of buying a house, even if they can; the way the mortgage-qualification pendulum has swung to very tight standards; and the loss of the federal tax credit for home purchases.

“It will likely take years for the fallout from the Great Recession to abate,” the report posited. “In addition to the expiration of the homebuyer tax credit program, which may have temporarily jacked up home sales, the market faces threats from the severe overhang of vacant units, still high unemployment, and record numbers of owners with homes worth less than the amount owed on their mortgages.”

The (barely) good news in all that is that houses are more affordable than they’ve been in years. “Nationwide, the median sales price dropped from 4.7 times the median household income in 2005 to 3.4 times in 2009,” the report noted. “When combined with low interest rates, this puts mortgage payments on the median priced home closer to median gross rents than at anytime since 1980. Among the 92 metropolitan areas consistently covered by NAR since 1989, price-to-income ratios in 21 are now below their long-run averages—some significantly so. ”

But does that help? The key to taking advantage of those low prices is to be employed and have the wherewithal to make a down payment, two difficult hurdles these days for much of the U.S. population.

The Slow CMBS Comeback

There may be some sparks of life in securitized commercial real estate lending, which was pretty much given up for dead after the Panic of 2008. Reuters reported on Monday that the Related Cos. will soon close on its first loan slated for inclusion in a mortgage security in more than two years.

According to the Related Cos., Deutsche Bank will lend it about $45 million on The Harrison, a new condo and retail project in Manhattan. The property is fully occupied and presumably the due diligence has examined the property and its tenants down to the molecular level.

The deal comes in the wake of a $716.3 million CMBS priced by JP Morgan Chase Commercial Mortgage Securities Corp. last week. That securitization was composed of 36 loans on retail properties. It was only the fifth CMBS since the market for those structures evaporated more than two years ago.

Wall Street was mostly up until the closing bell, when the indices ended mixed. The Dow Jones Industrial Average edged down 20.18 points, or 0.2 percent, while the S&P 500 lost 0.18 percent. The Nasdaq eked out a 0.02 percent gain.