This housing downturn is different from its predecessors and "has not yet run its full course," according to "The State of the Nation's Housing 2008" report issued today by the Joint Center for Housing Studies at Harvard University.

The study points out the falloff in housing starts, new home sales, and existing home sales already rivals the worst downturns in the post World War II era, and it reports that home price declines and mortgage defaults are the worst on records that date back to the 1960s and 1970s. "Mortgage rates have barely responded to the aggressive easing of the Federal Reserve, the supply of for-sale vacant units continues to grow, and much tighter underwriting is locking many would-be homebuyers out of the market," said Nicolas P.Retsinas, director of the center. "With home prices falling in most metropolitan areas, homeowners are tightening their belts, remodeling less, and staying on the sidelines."

Compounding the slump is the erosion in affordability caused by the run up in home values during the boom. According to the study, 15.8% of all households (17.7 million) were spending more than half their income on housing by 2006, an increase of 3.8 million since 2001. It points out that with much of the job growth in the economy in low-wage and part time employment, the affordability picture does not look particularly bright in the short-to-medium term.

"At some point demand will bounce back," said Retsinas. "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It is difficult to judge how far away from these conditions we may be. It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets."

In its executive summary, the study states, "The full scope of credit market problems and the path to recovery remain clouded. Until credit markets return to normal, the economy will be in peril not only from the impact of falling home prices on loan performance and consumer spending, but also from the disruptions to corporate and consumer borrowing."

Further out, however, the report contains cause for optimisim. It projects household growth at about 14.5 million over the next ten years, depending on immigration levels, as the so-called echo-boom comes to household-formation age.