Harvard Study: Millions Still Underwater But Current on Their Mortgages
More Than 40M Households Pay More Than 30 Percent for Housing
Charlene Crowell | 6/26/2013, 3 p.m.
Each year the Joint Center for Housing Studies at Harvard University assesses the nation’s housing outlook. The just-released The State of the Nation’s Housing in 2013 acknowledges that a housing recovery is underway; yet shares an array of findings that show only some Americans are a part of that recovery. The new and updated data reflect continued burdens on many households to pay housing costs, continuing racial disparities in homeownership and wealth, and an increasing number of consumers shifting to rentals from homeownership.
According to the report, “Even as the recovery gains momentum, millions of homeowners are still delinquent on their mortgages or owe more than their homes are worth, and severe housing cost burdens have set a new record. …Over 40 million households were at least moderately cost burdened (paying more than 30 percent of their incomes for housing), including 20.6 million households that were severely burdened (paying more than half of their incomes for housing)”, says the report.
From 2007-2011, 2.4 million homes changed from owner-occupied to renter-occupied, far more than the 900,000 rental units started during these same years. The 258,000 new rentals that came to market in 2012 represent the highest number since 2004 and affected 34 of the nation’s 100 largest metro areas. Especially sharp rental increases occurred in Austin, Raleigh and Bridgeport.
Additionally, despite low interest rates on 30-year fixed-rate mortgages, homeownership in communities of color remains a distant American Dream. Today, only 44 percent of African-Americans and 46 percent of Hispanics are homeowners. By comparison, white homeownership stands at 73 percent.
Mortgage loan denials contributed to some of the racial disparity in homeownership. In 2011, African-American mortgage applicants were denied nearly 37 percent of the time — more than twice that for white borrowers who were denied at 14 percent.
Similar to an earlier report by Brandeis University on racial wealth, the Harvard study also addressed the issue of wealth. By 2010, the report found that median net worth of a white homeowner was $214,500, more than 2.5 times that of a black homeowner and 2.8 times that of a Hispanic homeowner. Even comparing the history of homeownership by race from 1995 to 2012, the 2013 report found that during the troubled years when foreclosures were rising, 2005-2012, white homeownership levels remained well above 70 percent. Yet for communities of color, homeownership dwindled during these years.
In addition to these differences in homeownership and wealth, the report notes a growing pattern of consumers spending disproportionate amounts of income for housing. Consider these findings:
• 42.3 million families or 37 percent of the nation, faced housing cost burdens and paid more than 30 percent of pre-tax income on housing;
• In California, New York and New Jersey, more than 22 percent of households pay more than 50 percent of pre-tax income for housing;
• Nearly 28 percent of all African-American households carry severely cost-burdened housing.
Despite these burdens, the report found that the overwhelming majority of underwater homeowners continue to make payments on their mortgages that exceed the present value of their home.
According to Eric S. Belsky, Managing Director of the Joint Center for Housing Studies, “Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as long-standing housing affordability should be among the nation’s highest priorities.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at email@example.com.