Housing markets in many metropolitan areas appear to be stabilizing, but further steep drops in home prices could be seen if the broader economy does not recover, a new report by the National Low Income Housing Coalition (NLIHC) and the Center for Economic and Policy Research (CEPR) finds. "Hitting Bottom? An Updated Analysis of Rents and the Price of Housing in 100 Metropolitan Areas," utilizes methodology from two previously released reports to provide an analysis of the current state of the housing market. The report finds that in many markets, home prices are once again tracking more closely to rents, a sign that markets are stabilizing. However, the report also finds that in many markets, the local economy is suffering, which could put off the housing market recovery. In the long-term, the housing market will be robust only with a strong economy in which people have the incomes to afford rents and mortgages.
“This report indicates that housing markets are stabilizing at this time,” said NLIHC Research Director Danilo Pelletiere, a co-author of the study. “We need to assist this recovery by creating jobs. We should also use the bottom of the market as an opportunity to create affordable housing. Without such proactive efforts to increase the ability of Americans to afford homes, the bottom may prove false.”
The report also notes that in many places even as the market stabilizes, new homeowners are likely to be underwater—that is, owing more on their home than the home is worth—for some time to come. Negative equity in a home and high loan-to-value ratios are among the best predictors of foreclosure.
"In communities where foreclosure remains a problem, homeowners should be given the opportunity to remain in their homes as renters paying the fair market rent," said Dean Baker, co-director of CEPR and a co-author of the study. "This “right to rent” would provide homeowners facing foreclosure in hard-hit areas an important degree of housing security and stability."
The report details several policy recommendations that would help strengthen the demand for housing and stabilize markets, including:
► Adequately funding the National Housing Trust Fund to capitalize on current low prices, ensure long-term affordability in a recovery, absorb excess housing, and stimulate employment.
Stimulating the fundamental demand for housing through acting to lower unemployment and raise wages.
►Recognizing a leading role for rental housing in federal foreclosure mitigation and neighborhood stabilization policy, including allowing foreclosed homeowners to remain in their homes as renters.
The report, "Hitting Bottom? An Updated Analysis of Rents and the Price of Housing in 100 Metropolitan Areas" can be accessed here.
For more information, visit www.nlihc.org.