The power the housing sector has brought to bear on the overall economy has been well documented, so much so that the plight of those who are still battling to put roofs over their heads or keep them there has been reduced to almost a footnote.

Nevertheless, while housing's unprecedented strength has not only helped keep the country from falling headlong into a recession, it also has exacerbated the affordability problems facing not just low income families but even some moderate-income households with two fully employed wage earners. "Even households with incomes well above the full-time equivalent of the minium wage are struggling to find housing that meets their needs, at costs they can afford," says Eric Belsky, executive director of the Joint Center for Housing Studies at Harvard University, which is just out with its latest "State of the Nation's Housing."

The annual tome, which has been published since 1988, was one of the first to document the growing dichotomy between the housing haves and the housing have-nots. And the 2003 version finds that the great divide in widening.

Indeed, says Director Nicolas Retsinas, this year's report "highlights the irony of unaffordable housing in the midst of housing affluence."

The study found that one in seven households – a whopping 14.3 million – spend more than half their incomes on housing. And half of those are owners, not renters. In 1997, just 5.8 million families spent 50 percent or more of their incomes just so they could own their places instead of rent them.

One reason affordability pressures have intensified is that long-term income growth among those with the lowest incomes have failed to keep pace with rising housing costs. While house prices and rents continue to outpace inflation, the inflation-adjusted incomes of families in the bottom two income quintiles have been nearly flat since 1975.

Holding down a job doesn't help these folks much, either. And neither does a helping hand from government.

Despite earning between $17,500 and $50,000, 3.2 million households paid more than half of their incomes for housing. Worse, perhaps, there isn't one metro area or non-metropolitan county where a family with one full-time minimum wage earner can afford a modest one-bedroom apartment.

Furthermore, only a third of the nation's 9.9 million neediest renter households – those in the bottom fifth of the income distribution chain – receive housing assistance.

But of course, all is not bad, even for those who struggle most. For example, while foreclosure rates stand at record levels – some 450,000 owners where in the process of losing their houses at the end of last year – serious delinquency rates on conventional loans are "well below" previous peaks.

Conventional loans account for 85 percent of all mortgages, according to the Harvard study, yet under half of 1 percent are 90days or more past due. Several years of strong home price appreciation also have helped shore up the sagging equity positions of many owners, even those recent ones who put little of their own money down when they bought their places or took cash value out of their properties when they refinanced.

The report found that the equity stakes people have in their homes climbed by about $405 billion in the 2001-‘02 period. At the same time, household stock portfolios tumbled, losing $1.4 trillion in value.

Sure, mortgage debt is at record levels. But that's largely because today's buyers are able to get into their palaces with little more than a couple of house payments stashed safely away in the bank.

Even as the extension of credit to those with blemished credit histories has exposed a greater share of owners to the risk of default, only about 4 percent of all borrowers had equity of less than 5 percent in 2001, the Harvard study found. On the other hand, 88 percent had equity of 20 percent or more.

During the latest refinancing boom, owners recast a record $2.5 million in mortgage debt, an increase of 108 percent from the last wave in 1998-‘99. Whether or not those who raised their debt ceilings by taking money out of their houses (as opposed to cutting their payments with a lower interest rate and/or loan term) will have trouble making their house payments in the future remains to be seen. But for the economy as a whole, the process has already paid large dividends.

Refinancing has pumped an estimated $97 billion in equity back into the economy and paid off $70 billion more in debt, the study found. In addition, lower mortgage payments have injected $13 billion more into circulation.

"The housing sector continues to undergird a beleaguered economy," said Retsinas.

Moreover, when the economy shakes off the lingering effects of the downturn and regains momentum, housing will be well-positioned to remain solid for another decade, the report suggests.

Household growth is the primary driver of housing demand, and new formations are projected to reach 12 million during this decade. Couple that with the demand for second homes and replacements for obsolete houses, the report says, and as many as 17 million new units could be added between 2000 and 2010.

Published: June 17, 2003

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.