Shelter Indicator

The Calvert-Henderson Shelter Indicator dissects the macro-economic data to reveal a "good news, bad news" picture. The American dream of home ownership has never been so fulfilled, with a record 68% now owning homes. A majority of Americans are well-housed with over two-thirds in affordable, physically adequate, uncrowded housing. The housing market continued as an important buttress to the economy. Many analysts see the US housing boom, still supported by low interest rates, as a bubble, which rate increases could prick. The bad news is that shelter deprivation still exists in spite of the 1995-2000 economic expansion. The Urban Institute estimates that at any given moment, 800,000 people (including 200,000 children) are without housing. Some 5.3 million low-income renters are in distress. These statistics seem to be a reflection of our national poverty gap shown in our Income Indicator. The US savings rate is less than 2%, but this statistic is also under challenge as painting too grim a picture.

Mortgage debt stands at $5.4 trillion. Since the economy turned sour in late 2000, homeowners have re-financed to consolidate their other loans and take advantage of low interest rates. So far in 2004, housing prices are still rising and many are choosing housing and real estate investments over equities. By mid 2002, Americans had $14 trillion invested in housing versus $11 trillion in equities (The Economist, August 31, 2002). New worries emerged about accounting problems at Fannie Mae and Freddie Mac, which together stand behind $4 trillion of US mortgages. Job losses have helped cause mortgage default rates to increase to the highest level in 30 years. In 2003, however, even before interest rates rose in August, a record 1.2% of US mortgages were in foreclosure — due partly to unemployment levels now officially at 5.6%. Bank and consumer credit is still readily available and rock bottom interest rates made mortgages more accessible even though mortgage foreclosures were up 9% in the first quarter of 2004. Job losses also make prospective homeowners wary and consumer confidence declined further in 2003 and 2004. Any increase in interest rates could throw many homeowners into default and adversely affect bank earnings. In the current round of mortgage re-financing, home owners should avoid variable, adjustable rate mortgages, since interest rates are likely to rise in 2004. The state of shelter in the United States also affects opportunities for social mobility, education, and energy efficiency, and thus is related to many other indicators, including Employment, Income, Health, Energy, and Environment.