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In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s first update discusses the latest homeownership rate.
- The homeownership rate in America fell to the lowest level in nearly 20 years. The latest figure of 65.2 percent ownership rate in the first quarter of 2013 is down only a decimal point from the prior quarter, but still marks a continuing trend of falling rates since the bubble years when a record high of 69 percent of Americans owned their homes.
- The homeownership rate is likely to fall further before stabilizing. Why? The growth of households over the next two years is likely to be a 50-50 split between new owners and new renters. Though there is sizeable pent-up demand for home buying, excessively tight underwriting will limit the number of first-time homebuyers, thereby preventing conversion of renters to homeowners. Also recent job creations will unbridle young adults to move out of their parent’s home, but they will start out as renters.
- The rise in the renter population with no net increase in the owner population at a time of housing recovery automatically means greater unequal distribution of wealth. Housing wealth is rising because of price increases, but the wealth is going to the fewer and fewer households who happen to be homeowners and those who own more than one homes.
- Clearly, new and stronger regulation to prevent the excesses that led to the housing bubble is needed. The Wall Street titans who are no more, such as Bear Stearns and Lehman Brothers, made colossal mistakes in coming up with and betting on subprime mortgages. Other big Wall Street players received massive government aid at their time of need. But the new regulation out of Dodd-Frank is said to be confusing and burdensome, which greatly restricts credit availability. Construction loans are also hard to get, consequently leading to housing shortage and a rapid run-up in home prices. Many of the financially sound and credit worthy renters who are unable to participate in the housing recovery are therefore weeping.
- But as Dante’s beloved Beatrice is to have told him – “Stop the weeping now. Save the hotter tears for later.” For Americans, that later time is if PATH legislation becomes a law. PATH will significantly raise down payment requirements, make 30-year fixed rate mortgages harder to get, and boost mortgage rates for nearly all homebuyers since the government guarantee would be removed. Because PATH will favor large banks over small ones and would be vulnerable to too-big-to-fail, American taxpayers will face significant risk of bailing out large financial banks. PATH is a law against property and sustainable homeownership. PATH, in short, is a law against hard work and entrepreneurship.
- More info on PATH is here http://speakingofrealestate.blogs.realtor.org/2013/07/29/why-path-approach-to-fannie-freddie-phase-out-is-troubling/
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