THOMAS CALLAHAN
Foreclosures not rising

Even as housing continued to prop up the nation’s economy during the last two years, three out of 10 households have housing affordability problems – spending 30 percent or more of their income on housing, according to Harvard University study released last week.

Meanwhile, the number of households spending more than half of their income for housing has risen. Over 7 million households had to use more than half of their income to pay for housing in 2001, up from 5.8 million in 1997, according “The State of the Nation’s Housing: 2003” by Harvard University’s Joint Center for Housing.

The report’s findings aren’t too shocking for many residents in Massachusetts, where home prices skyrocketed in recent years. In Boston’s Back Bay, Beacon Hill and other downtown neighborhoods, the median selling price for single-family homes jumped 41 percent in three years, according to The Warren Group, Banker & Tradesman’s parent company. Boston’s median selling price ballooned to more than $1.3 million last year, up from the $944,300 median selling price in 1999.

Even homebuyers in more affordable cities like Worcester and Springfield have seen steep rises in prices during the last years. In Worcester, the median selling price for a single-family home was $179,000 in 2002, a 66 increase from the $108,000 median posted three years before. Springfield’s median was lower last year at $91,900, but still 31 percent higher than the city’s 1999 median of $70,000.

And the bad news is that even though the expansion of credit and the arrival of mortgage financing products with low down-payment requirements have made it easier for some to purchase a home, consumers may be headed for difficult times. According to the study, “Expansion of credit since 1993 to homeowners with blemished credit histories has exposed a growing share of borrowers to default risk. The concentration of these subprime loans in low-income, especially minority, neighborhoods, has exposed some neighborhoods to mounting foreclosures.”

However, while the percentage of conventional mortgages 90 days past due increased in 2002, the study reveals that the current percentage remains low – under one-half of 1 percent and well below previous peaks.

In Massachusetts, some housing advocates say they’re aware of the risks and watching delinquency and foreclosure rates closely.

“Fortunately, with the folks we work with we haven’t seen a great uptick in delinquency rates or foreclosure rates,” said Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance.

Yet, the Bay State’s high home prices, the shaky economy and the proliferation of subprime lending doesn’t bode well for consumers, according to Callahan.

“For some households, that’s a dangerous combination,” he said, noting that is why MAHA is currently lobbying for tougher anti-predatory lending laws in the commonwealth.

“It is appalling, but not surprising that affordability problems for people with the lowest incomes continue to worsen. Without a public investment in housing, the gap between what people earn and what housing costs will continue to grow,” said National Low Income Housing Coalition President Sheila Crowley in a prepared statement.

The report shows that mortgage refinancings hit a record last year, and this year are on course to exceed those levels. An estimated $97 billion was pumped back into the economy because of refinancings.

Nicolas P. Retsinas, the Joint Center for Housing’s director, predicts a healthy housing market in future years.

“The housing sector continues to undergird a beleaguered economy as investment in home building, remodeling and home sales reached record highs,” he said in a press release announcing the report’s release. “Moreover, household formations buoyed by immigration and enhanced housing demand by wealthier baby boomers coupled with supply constraints augur well for increased housing investment in the decade ahead.”