Since the home buyer tax credit expired in April, home sales are down as much as 42% across the country, not a good sign for the housing market. According to the annual report, State of Nations Housing released this week by the Joint Center for Housing Studies at Harvard University, it could take years for the housing market to rebound. The issue at the forefront of the housing market troubles, according to the report, is unemployment.
Unemployment seems to have the largest impact on the housing market, and with unemployment rates near record highs, this is not good news. As the economy is struggling to recover, unemployment is expected to decline at a snail’s pace. Bottom line, when people are unemployed they simply cannot afford to purchase a home.
“If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” said Eric S. Belsky, executive director of Harvard’s Joint Center for Housing Studies, in a news release. Jobs keep homeowners out of foreclosure and help others feel confident enough to form households.
Data from various sources is used to compile Harvard’s annual housing report. The data is then analyzed to help gain perspective on the current housing market trends. This year’s report also touched on other areas that are affecting the housing market’s slow recovery.
Today it is harder to get a loan, which is shutting some potential buyers right out of the market. Lenders have learned from the economic collapse that they need to be careful who they lend money to, and therefore have tightened standards for lending. Where less than stellar credit at one time might have been overlooked, it is not anymore.
Demand for homes has also plummeted. With the expired home owner’s credit, there are less people out there even looking or thinking about purchasing.
Inventory also continues to increase. Defaults are still plentiful and repossessed homes are being added to the market every day. It is hard for the market to recover when inventory far outweighs demand.
Finally, there is a huge decrease in young buyers. The economic collapse hit young people particularly hard. Where young people in the past would look to buy their first home in their late 20’s, many of these individuals will need to wait longer.