U.S. Housing Rebound to Be Prolonged: Harvard Study

Reuters (06/23/08); Adler, Lynn
A recent study from Harvard University's Joint Center for Housing Studies indicates that the residential property market could take longer than expected to recover, as it has been hit hard by home price declines, surging foreclosures, a drop in consumer spending, rising mortgage rates, tighter underwriting standards and slower economic growth. According to center director Nicolas Retsinas, "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets." The study states that substantial home price declines, a decrease in rents, a drop in interest rates and significant income growth are needed for homes to be as affordable as they were eight years ago, prior to the housing boom.