Home sales and housing starts began turning up in early 2009, according to the State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University. First-time buyers and government help drove an increase in existing home sales, while record foreclosures continued.

“Many factors are still weighing heavily on the market,” says Nicolas P. Retsinas, Director of the Joint Center for Housing Studies. “Elevated vacancy rates, record foreclosures, the expiration of the homebuyer tax credit, and continued high unemployment are all causes for concern.”

“If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” says Eric S. Belsky, Executive Director of the Joint Center for Housing Studies. “Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too.”

Even if the recovery in sales and residential construction flourishes, the report warns, the adverse consequences of the recession and the financial crisis will linger.  An estimated one in seven homeowners have homes worth less than what they owe on their mortgages and nearly 5 million need their home prices to rebound by 25% before they are back above water.  

Falling home prices, loan modifications, and softening rents did not reduce the number of households spending half or more of their income on housing—18.6 million.

Homeowners are making energy-saving investments. After adjusting for temperatures, energy consumption per square foot of housing built before 1990 fell by 22% from 1993 to 2005 largely as a result of improvements. Consumption could be cut more if these homes were brought up to the same efficiencies as those built in the 2000s.

“Not only can new green building standards and innovative architectural designs help reduce energy consumption in the next generation of homes, there are opportunities to wring major savings out of the existing housing stock,” said Mohsen Mostafavi, Dean of the Harvard University Graduate School of Design. “Today’s homeowner has the ability to significantly reduce home energy costs through environmentally-conscious building materials and design approaches.”

Changing demographics could spur construction and sales. Bolstered by immigrants, the echo-boom generation is already larger than the baby boom generation, and the baby-bust generation (born 1966-1985) is nearly as large. If immigration matches the pace projected by the Census Bureau and head-of-household rates by age and race hold steady, household growth should come close to 15 million from 2010 to 2020. Even if it falls to half the projected pace, household growth should equal the 12.5 million growth from 1995-2005.

The State of the Nation’s Housing, released annually by the Joint Center for Housing Studies, provides a periodic assessment of the nation’s housing outlook and summarizes important trends in the economics and demographics of housing. The report continues to earn national recognition as a source of information regularly utilized by housing researchers, industry analysts, policy makers, and the business community.