As reported by Inman News, the current housing slump is far from over and is shaping up to be the worst in 50 years, according to an annual report on the state of the nation’s housing markets from the Joint Center for Housing Studies of Harvard University.

• Drastic production cuts and deep price discounts in 2005-2007 helped shrink the inventory of unsold new homes from a mid-2006 peak of more than 570,000 to less than 500,000 in early 2008.

• But the number of homes entering foreclosure nearly doubled to 1.3 million last year,

• Vacant homes for sale rose 46 percent over two years, to 2.12 million.

Single-family home prices in the first quarter of 2008 were down 12 percent from their October 2005 peak — 18 percent in real terms, after adjusting for inflation.

Some good news: The report, “The State of the Nation’s Housing 2008,” is more optimistic about medium- to long-term prospects, estimating that unless there’s a serious, prolonged economic decline or a marked cutback in immigration, the nation will gain 14.4 million new households between 2010 and 2020, compared with 12.6 million between 1995 and 2005.

But, how bad is the downturn, really?

• The report noted that sales of existing homes fell 13 percent in 2007 to 4.9 million, and sales of new homes were down 26 percent to 776,000, the lowest level since 1996.

• The 500,000 unsold new single-family homes available in early 2008 was down from a mid-2006 peak of more than 570,000, but the slower rate of sales translates into an 11 month supply – a number not seen since the 1970s. A supply of more than six months is considered a buyer’s market, and the inventory of existing single-family homes rose to 10.7 months in April.

• Housing permits fell 24 percent nationwide in 2007, with single-family permits down 29 percent and multifamily permits down 9 percent for the year. The total decline from the 2005 peak was 35 percent, including a 42 percent reduction in single-family permits. 

•  The report said that it’s hard to gauge with certainty how far home prices have fallen, as each of the three most commonly used measures paints a different picture.

How does the current downturn stack up against others in recent memory?

• The 12 percent drop in national home prices since the October 2005 peak (18 percent in real terms) exceeds the downturns of the early ’80s and early ’90s.

• At current interest rates, the national median price would have to fall an additional 12 percent from the end of 2007 to bring the monthly payments on a newly purchased median-priced home back to 2003 levels, the report said. In 40 metros, prices would have to fall more than 25 percent.

The boom-bust housing cycle has been reflected in the home-ownership rate. From 1994 to 2004, the home-ownership rate surged by five percentage points, peaking at 69 percent. Since then, home-ownership rates have fallen back for most groups, including a nearly two-point drop among black households and a 1.4-point drop among young households. The number of renter households increased by more than 2 million from 2004 to 2007, lowering the national home-ownership rate to 68.1 percent.

THE FUTURE: Once the oversupply of housing is worked off and home prices start to recover, the use of automated underwriting tools, a return to more traditional mortgage products, and the strength of underlying demand should put the number of homeowners back on the rise, the report said.

• Minority Growth: The minority share is likely to reach about 35 percent by 2020, the report said. The report projected that minority household growth among 35- to 64-year-olds should remain strong in 2010-2020, while the number of white middle-aged households will begin to decline after 2010 as baby boomers reach retirement age.

• Singles and/or Senior Growth: People living alone are expected to account for 36 percent of household growth between 2010 and 2020, and 75 percent of the 5.3 million projected increase in single-person households will be among those 65 and older.

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