The Research Institute for Housing America recently released a special report that warns of a possible further drop in the rate of homeownership in the United States due to a variety of factors, including the continued tightening of credit.
According to the report, entitled “Homeownership Boom and Bust 2000 to 2009: Where Will the Homeownership Rate Go From Here?,” the homeownership rate of 69.2% in 2004 was unsustainable, and the drop to 66.4% in the first quarter of 2011 more closely reflects historical averages. The report concluded that the majority of new homeowners during the last decade were people under 30, and that the increase in the homeownership rate to historic levels was likely attributable to unprecedented access to mortgage credit.
The UCLA Ziman Center for Real Estate recently released a summary of the key findings of the report, which include the following:
- A combination of changes in mortgage credit standards and attitudes towards investment in homeownership likely contributed to much of the boom and bust in homeownership over the decade. As credit conditions loosened in the first part of the decade, many people of all ages who would have remained renters instead became homeowners. With the financial crash, the recession, and tighter credit conditions, homeownership rates have fallen back to levels close to those of 2000 for most age groups.
- Changes in the population’s socio-demographic composition and economic attributes also served to lower homeownership rates between 2000 and 2009. For all household heads age 20 to 80, demographic-socioeconomic shifts pushed homeownership rates down by roughly two additional percentage points over the period. These effects were notably different across demographic groups, however. For example, among individuals 25 to 35 years old, shifts in their demographic-socioeconomic attributes pushed homeownership rates down by nearly five percentage points over the 2000-2009 period. For African Americans, the analogous value was roughly one percentage point.
- Individuals appear to have been more risk-seeking in their approach to home buying in the first half of the last decade. This changed to a more risk-averse posture following the real estate meltdown.
- Between 2000 and 2009, there was a one percentage point increase in the homeownership rate. But, were it not for the shifts in access to homeownership through easier credit and the changes in socioeconomic conditions, the homeownership rate would have actually fallen between 2000 and 2005, rather than increasing.