An increasing glut of empty homes for sale hasn’t had much of an effect on lowering home prices to more attractive levels for buyers, according to a national housing study released yesterday.

Record-setting housing starts, sales and price appreciation enjoyed since the start of the decade ended last year, says this year’s “State of the Nation’s Housing” report from the Harvard University Joint Center for Housing Studies.

According to the group’s data-crunching, single-family housing starts fell 15 percent last year. However, by the end of the fourth-quarter, those starts were 30 percent below peak 2005 levels - nearly matching the country’s last housing peak-to-trough drop between 1986 and 1991. Total home sales were down 10 percent in 2006.

The drop in homebuilding was so great that the center says it chopped a full percentage point off national economic growth in the latter half of 2006.

Still, while the sales may have done an about-face, the overheated momentum of the building industry marched on. Between the end of 2005 and the end of 2006, the report says, the number of vacant homes on the market jumped more than 500,000 units.

“Many buyers are now waiting on the sidelines hoping prices will fall,”Nicolas Retsinas, director of the center, said in a news release.

Those buyers may wait longer than they thought since the report also says nominal home prices managed to increase last year amidst the downturn. Nominal median home prices increased in 23 of 149 metro areas evaluated. Those areas that had the worst price decreases were in economically depressed areas, largely in the Midwest.

The report also shows how creative financing helped fuel the growth of the housing market. While such mortgages helped more people keep up with growing prices, many now have to contend with rising resets in monthly payments that are contributing to foreclosures and increasing the supply of homes for sale.

  • Subprime lending went from practically not existing in the early-1990s to account for 20 percent of loan originations last year.

  • Mortgages with interest-only and other payment options went from less than 5 percent of originations in 2002 to a high of 38 percent in 2005.

  • Across all loans, nearly a quarter of a million homeowners entered foreclosure proceedings in just the fourth quarter of 2006.