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Home market takes stock
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June 27, 2000: 8:30 p.m. ET
There's more wealth in homes than stocks for most, a new report finds
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - This is a very, very, very good time for the U.S. housing market. But there are some bad, bad things lurking behind the numbers. That's according to a report on the state of the nation's housing released Tuesday by Harvard University and the Ford Foundation.
Fueled by the stellar performance of the U.S. economy, this is by far the longest boom on record for the housing market, The State of the Nation's Housing: 2000 points out. Behind the numbers, much can be drawn about the pros and cons of homeownership, as well as the pros and cons of who owns homes.
Home is where the hearth is
The report, generated by Harvard's Joint Center for Housing Studies, makes for fascinating reading. For instance, it points out that, for people who do own a home, their house is still their primary source of wealth and assets. That's true even if they invest in the stock market.
Just under 60 percent of all homeowners have more wealth in the bricks and mortar that shelter them as they sleep at night than in the market. Only the very richest Americans -- those that make more than $100,000 in a year -- have more than half their wealth outside their home, and in the stock market.
 After April's tech meltdown, that may be just as well. Home prices are much less volatile than stocks, said Eric Belsky, the Joint Center's executive director and the primary researcher of the study.
Belsky also stated that housing wealth is much less concentrated than stock wealth.
The richest 1 percent of shareholders corner 39 percent of the stock-market money in the United States, he explained. That contrasts starkly with the housing market, where the richest 1 percent of homeowners own just 13 percent of the wealth in homes, he said.
Belsky spoke, alongside the other members of the team that produced the study, at the Ford Foundation on Tuesday morning. The New York City-based Ford Foundation, the principal sponsor, has funded the center, which is based in Cambridge, Mass., for the past 12 years. Groups such as the National Association of Realtors, the Fannie Mae Foundation and the Mortgage Bankers Association of America also participated as sponsors of the report.
'A remarkable time'
Nicolas Retsinas, director of the Joint Center, characterized the data in the report as the tips of many icebergs. He added that there was much need for further exploration. The Joint Center is a collaboration between Harvard's John F. Kennedy School of Government and its Graduate School of Design.
"This is really quite a time. It is a remarkable time," Retsinas said. "We are the best-housed the American people has ever been." Home equity is growing, home values are rising and homes still make more people happy, financially, than anything else, despite all the attention given the dot.com investment craze, he explained.
Those trends run true despite the Federal Reserve's repeated moves to raise interest rates. The rate of growth in housing values is slowing, it's true, and housing sales have dropped off this year, aside than for the month of May. The National Association of Realtors believes that was an anomaly caused by deals that buyers arranged earlier.
The evidence is building that the Federal Reserve is succeeding in cooling both the economy and the housing market. But the arrows on the road signs do not all point in the same direction.
When it comes to the current state of housing, "there are some signs of a slowdown, but they are very ambiguous signs," Retsinas said. "It's not clear, and it's not overwhelming."
Thorns on the rose
What is very clear is that, while much of the news for housing is positive, there are blemishes on the collective American record. The gap between the share of whites that own homes and the share of other ethnic groups that own homes has hardly narrowed, the study found.
 Ethnic groups other than non-Hispanic whites will account for almost two-thirds of the growth in the housing market over the next decade, it continues.
Specifically, Hispanics will account for 31 percent of the 11.7 million net new households that will end up buying a home between 2000 and 2010, according to the report. Blacks will account for 20 percent of the growth. Asians and other groups will account for 13 percent. Non-Hispanic whites will account for 36 percent, all according to the report.
An important import: demand
Immigrants will also play an important part in generating demand for homes over the next 10 years, the report states. They will be particularly important to central cities, said Nancy McArdle, research associate at the Joint Center.
There are several factors driving people out of city centers, she said. Jobs continue to grow in areas with low population density. Urban sprawl is growing. People often like living in large houses on the fringes of cities.
 So immigrants, who often move to city centers when they come to the United States, and rent then buy, are already playing an important role. In the Northeast and Midwest, only the city centers of New York City, Columbus, Ohio, and Kansas City have seen consistent growth, McArdle said.
What's more, had immigrants not bought homes in the Northeast over the last three years, the number of net households that own homes there would have dropped, the study stated.
In all, people who were not born in America have contributed one-quarter of the growth in home ownership over the last three years, the Joint Center found.
Can you afford to buy?
Affordability of housing is also an increasing problem. That comes courtesy of the very facts that make for such good news for current homeowners.
Thanks to rising home prices, people who rent or otherwise do not own a home are finding it increasingly hard to generate the momentum to carry them over the threshold and into a house they can own, the study's findings suggest.
 Rising interest rates also work their way home, literally, when it comes to affordability. Mortgages get more expensive. And rents have been rising, Belsky pointed out, most dramatically in the Northeast and the West.
This effect creates a nasty entanglement for those who have not yet bought a home.
"For those who haven't got into the home-ownership boom, they're in a double bind," Belsky said. "It is more and more difficult to buy a home. And rents are increasing." They rose faster than inflation in 1999 for the third straight year, the study states.
So not only is a home more out of reach, but prospective buyers struggle to save enough to do anything about it.
This has been particularly true with the working poor, the Harvard group has found. "Full-time work does in no way guarantee the housing you're in," Belsky said.
Subprime lenders -- who make loans to people with poor or no credit -- have entered a market that conventional home-loan lenders ignored, Retsinas said. In some ways that is positive.
But problems with predatory lending have also grown as more companies looked to appeal to prospective homebuyers in poorer segments of the population. Retsinas, who served as an assistant secretary at the U.S. Department of Housing and Urban Development for five years, said he expects legislative action on that front to try to redress any excesses.
A happy ending?
In general, though, housing is a happy story, according to the report. It is roaring away. In fact, 23 metro areas, including Las Vegas, Atlanta, Charlotte, N.C., McAllen, Texas, and Phoenix, added 25 percent or more to the amount of houses they have in just eight years, from 1990 to 1998.
That's unlikely to change, as demographics work in the housing market's favor. For instance, Baby Boomers are reaching 50 and buying second homes. Because people marry later and get divorced more often, there are more people living on their own.
The report suggests that for most people, buying a home will be the most important financial decision they make in their lives. The full text of the report is available online, at the center's Web site. 
-- Click here to send email to Alex Frew McMillan
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