Tag Archives: Homeownership Rate

Can the drop in homeownership be good news? When President George W. Bush followed his predecessor Bill Clinton in pushing homeownership, one loud dissenter was British economist Andrew Oswald who argued that far from improving the economy, as Bush (and Clinton before him) said it would, homeownership hurts the economy in the long run. Oswald produced data to show that every five percent rise in homeownership results in a one percentage point increase in the unemployment rate.

Imagine if someone removed the speedometer from your car and then put limits on how fast or slow you could drive. That's what 11 House members are doing with legislation which would prohibit the Census Bureau from any data collection except for the decennial headcount of Americans. The impact of the bill HR 1638 would be to eviscerate and effectively eliminate the monthly employment situation report that produces, among other things, the unemployment rate as well as a host of other bits of data about the economy. The sponsors of the bill must believe that if we don't count unemployment it won't exist.

With the homeownership rate already at its lowest point since 1995, Capital Economics predicts further decline before a rebound occurs. The analytics firm predicted last July that the homeownership rate would fall to a low of 64 percent, and the firm is sticking to that forecast. The firm suggests the 64 percent low will come sometime ""within a year or so,"" and when it does, the market will have about 9 million more renters when the homeownership rate peaked. One of the major contributors to the ongoing decline in homeownership is the high level of foreclosures that continues to challenge the market.

The number of households owning homes fell 698,000 to 74,511,000 in the first quarter, the first decline in almost two years, according to a Census Bureau report Tuesday. At the same time, the nation's homeownership rate fell to 65 percent (seasonally adjusted), the lowest level since the fourth quarter of 1995. The Census data paints a grim picture for the home sales market, which has already been struggling against mortgage restrictions and weak inventory.

The American Dream is still alive, and a recent survey from Gallup provided the data to support this conclusion. According to the survey, more than half of Americans (56 percent) own and plan to continue owning, while 25 percent say they don't own but plan to in the next 10 years, which means 81 percent of Americans either own or have the intention to. The research company, however, noted that the current share of overall homeownership found is actually the lowest since the question was first posed in 2001.

Speaking before the Brookings Institution in Washington, Bank of America CEO Brian Moynihan raised the issues of whether homeownership is right for everyone and how the mortgage market will be financed in the future. While most Americans continue to include homeownership in their personal image of the American dream, Moynihan says, ""as a just democratic society, we owe all our citizens a safe, good place to live, but a roof over one's head doesn't always have to come with a mortgage. In some cases, it shouldn't come with that.""

The Federal Housing Administration (FHA) has a mission of making the American dream of homeownership accessible to low- and moderate-income families and first-time homebuyers. However, due to FHA's underwriting policies and practices, Edward Pinto, resident at the American Enterprise Institute (AEI), argued the administration has instead put ""a high percentage of low- and moderate-income families and communities at risk of excessively high foreclosure rates.""

Consumers are becoming more positive toward the idea of homeownership as home prices rise and the threat of delinquencies and foreclosures subside, Trulia reported Wednesday. Confidence in future ownership is especially prevalent among young renters. According to Trulia's American Dream survey, 93 percent of renters between the ages of 18 and 34 plan to purchase a home some day. For 31 percent of renters, that ""some day"" is actually within the next two years, an increase from 28 percent in May 2012 and 22 percent in January 2011.

In a speech Thursday at the Operation HOPE Global Financial Dignity Summit in Atlanta, Federal Reserve Chairman Ben Bernanke spoke of the amplified effect the housing crisis has had on minorities and low-income families across the country. ""Lower-income and minority communities are often disproportionately affected by problems in the national economy, and the effects of the housing bust have followed that unfortunate pattern,"" Bernanke stated.

Despite the recent declines in homeownership, the cost burden of owning a home decreased in 2011 and has ""fallen substantially for young owners during the last four years,"" Fannie Mae stated in a recent report. When measuring housing cost burden, analysts often look for households paying more than 30 percent of their gross income in housing costs, which analysts define as rental or mortgage payments combined with utility spending. In 2011, the percentage of homeowners who fell into this category decreased by about one percentage point. In contrast, the number of renters in this category grew.