PRESS RELEASE

CONTACT: Elizabeth England: (617) 495-7640

June 26, 2001

The State of the Nation's Housing: 2001, released today by The Joint Center for Housing Studies of Harvard University, finds that despite the weakening economy, home sales entered the year at near record levels, prices and rents continued to climb and residential fixed investment in 2000 was off a mere half percent. "Ordinarily, sharp drops in housing production and slowing home sales take the wind out the economy ahead of other sectors," explains Nicolas P. Retsinas, Director of the Joint Center, "but low interest rates and strong demand have helped housing markets stay strong." Interest rates also triggered a wave of mortgage refinancing that put cash in the hands of consumers and helped offset other drags on consumer spending. People are leveraging their homes more than ever before; existing homeowners are taking advantage of the mortgage interest rates and rising home values to finance other consumption, while homebuyers are capitalizing on lower down-payment requirements. The remarkable growth in house values notwithstanding, home equity as a share of home value has fallen ten percentage points to postwar lows.

Rising home prices have eroded affordability for many homebuyers. Last year, mortgage costs for the typical homebuyer rose so much faster than income that the rising cost alone absorbed most of the income gain. Rent exceeded inflation for the fourth year in a row. Even though renters' income growth outstripped rent gains in the latter part of the 1990s, the incidence of housing affordability problems barely eased for low-income households and started to increase among moderate-income households. Despite the booming economy in the second half of the 1990s, one in seven men and one in twelve women between the ages of twenty-five and thirty-four live with their parents and the share of people living in three-generation households also increased. The fact that nearly two-thirds of extremely low-income households spend more than half their incomes on housing is a glaring sign that affordability is a nation-wide problem. "More and more, it takes two incomes to afford housing for low and moderate income families," explains Retsinas. "In fact, there is no state in which full-time minimum wage work is enough to afford, at 30 percent of income, a two-bedroom apartment at the federal fair-market rent."

Rapidly escalating house prices have raised concerns about the security of recent gains in homeownership. House price appreciation in the current cycle, after adjusting for inflation, now surpasses gains in the 1980s and exceeds twenty percent in many of the nation's large metropolitan areas. "It's only natural that these run ups would heighten concerns about whether they are sustainable," notes Eric Belsky, Executive Director of the Center, "but it will take a much more significant economic downturn than has materialized so far to cause real prices to fall."

Immigration has accounted for one-quarter to one-third of recent household growth, the study finds. Largely due to prospective immigration, minorities are expected to account for fully two-thirds of household growth in the coming decades. Immigrants and domestic-born minorities played a vital role in the 1990s in sustaining central cities and revitalizing neighborhoods. Nonetheless, more minorities as well as whites are leaving central cities than are returning to them. As a result, suburbs continue to outstrip central city population growth in most metropolitan areas and a broad back-to-the city movement sufficient to offset this has yet to occur. Retsinas concludes, "because of their lower average incomes and wealth, many minority households will face special challenges affording higher rents and achieving homeownership in the coming decade."

The research report was released today at the Ford Foundation headquarters in New York. Principal support for this study was provided by the Ford Foundation and the Policy Advisory Board of the Joint Center for Housing Studies. Additional support was provided by the Fannie Mae Foundation, the FHLBanks, Freddie Mac, the Housing Assistance Council, the Mortgage Bankers Association of America, the National Association of Home Builders, the National Association of Housing and Redevelopment Officials, the National Association of Local Housing Finance Agencies, the National Association of Realtors, the National Council of State Housing Agencies, the National Housing Endowment, the National Low Income Housing Coalition, the National Multi Housing Council, and the Research Institute for Housing America.

Harvard's Joint Center for Housing Studies is the nation's leading center for information and research on housing in the United States. Established in 1959, the Joint Center is a collaborative unit affiliated with the Harvard Design School and the Kennedy School of Government. Nicolas P. Retsinas has served as Director of the Joint Center for Housing Studies since 1998. Mr. Retsinas was previously Assistant Secretary for Housing-Federal Housing Commissioner at the U.S. Department of Housing and Urban Development and a member of the Board of Directors of the Federal Deposit Insurance Corporation. Eric Belsky, Executive Director of the Joint Center, also serves as the Research Director for the Millennial Housing Commission.

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EDITORIAL NOTES:
Presentation and Press Conference in New York: The State of the Nation's Housing: 2001 will be presented and discussed Tuesday, June 26, beginning at 11:00 AM at the Ford Foundation, 11th Floor Training Room, 320 East 43rd Street, New York, NY. Please see the enclosed Press Registration Form.

Report available online: Beginning June 26, the complete text of the report of The State of the Nation's Housing: 2001 will be available at the Harvard Joint Center for Housing Studies' website at www.gsd.harvard.edu/jcenter.

For more information about the Joint Center and its programs,
please call (617) 495-7908.