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15 Year Low in Home Ownership

Reasons why there is a 15 year low in home ownership.

Is it that difficult to figure out why we are at a 15 year low? In the last 5 years how many foreclosures have there been? How restrictive have all the recent credit guidelines been?

I get calls every day from folks that want to get pre-qualified to purchase a home, but for one reason or another, they can’t qualify right now. I share with them, what they need to do or how much time needs to go by before they can qualify for a home purchase.

In every situation I will let them know what is possible and what they have to do to get themselves prepared to become homeowners. Over the next few years, you will see levels exceed the previous highs.

Home Ownership Rate Forecast

BY: NAR 

The U.S. home ownership rate stands at a 15-year low with the latest figures showing 65.6 percent of Americans living in owner-occupied homes.  At peak in 2004 the ownership rate was a hair shy of 70 percent.  Over the next two years it may fall further, possibly to 64 percent before stabilizing.  But the falling homeownership rate will not mean fewer home sales.  The dynamics is such that both the rental and ownership households will rise, though the proportion will be such that the home ownership rate will fall.

Though ownership and rental demand at first appear to be a trade-off in most years, the net number of homeowners and renters also rises simultaneously in most years.  It is a natural outgrowth of about 3 million additional people living in the country each year, which generally leads to about 1.1 to 1.3 million net new household formations each year.  From the 1960s on, the number of home-owning households rose on average by about one million each year while the number of rental households rose by 300,000 to 400,000.  In some years, there are distinct tradeoffs between owning and renting with one rising while the other falls.  The starkest example of this are the years since the housing bubble crashed.  The number of homeowners fell from 2005 to today while the number of renters rose quite significantly.  The key reason for this prolonged multiyear trade-off development arose because of a sharp slowdown in household formation.  Household formation in the past 5 years has been only the half the normal rate.  It is understandable, given the difficult economic conditions of the past several years, for many young adults to move into their parents’ home or find extra roommates to share the living costs.  But a return to normal household formation will finally mean a rise in the net new numbers of homeowners and renters, as has been historically the case.  In a more optimistic scenario, if the household formation burst out in order to compensate for the prolonged suppression, to say something like 1.5 million annually over the next few years, then the increase in net new homeowners and net new renters could both be higher than their historic average gains.

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R Eleveld August 23, 2012 at 11:20 PM
Kaptain, Remember that if you say it will rain, sooner or later you will be correct. I look at things differently. We are beginning to come out of this mess, I predicted 2012 was the bottom, and I may be off a year. Time will tell.
R Eleveld August 24, 2012 at 02:29 AM
The video that popped up was some 3 hours long... and unfortunately I do not have the time to watch or listen, is there a piece that gets to the kernel of the discussion?
Kaptainsteve August 24, 2012 at 12:45 PM
R, Here ya go; http://youtu.be/NQMAf5jTFc8 and another great/recent one here; http://youtu.be/tMY_tvXoevk Listen to what Max says about high frequency trading and all fraud on Wall Street with big companies like Groupon, Facebook's pump and dump scam (Obama's arm around Zuckerberg) and Zynga and how they identify losses as revenue and how Zynga uses Farmville "virtual money" as REAL ASSETS for the books! The books are cooked. Losses equal revenue. Pretend money equals real money. There are no accepted accounting principals, regulators/accounting firms like Ernst and Young are completely crooked and in on the scam. John Corzine/MFGlobal steal millions and NO PENALTY, no investigation. The GIANT BANKS, Jamie Dimon, JP Morgan/Chase, and HBSC launder money for terrorists and drug cartels and get slaps on the wrists that amount to tribute fees to the government like mafia kick ups to the boss, and on and on... The house of cards will collapse very soon. Recent Schiff Analogy Here and how Paul Ryan is advocating 27 years of spending INCREASES and Washington calls it "a spending cut!" ; http://youtu.be/zekaPHiQ31E
R Eleveld August 24, 2012 at 10:10 PM
@Kaptain.... Economic cycles collapse when EVERYONE is drinking the kool-aid. What I mean is that in 1998-99 everyone said .coms we a great place to invest. The internet would be huge. Companies fell over each other to install fiber and infrastructure, and everyone wanted a .com stock. A collapse can not occur when there are still greedy people with money or available credit that could be invested or used to buy assets. It is when and ONLY when there is no easily available capital or credit left, then the prices crash. Why? Because there is no one left to support the prices. When it starts it is like dominoes falling hitting the next down the hill we go. In the Stock Market this occurs very quickly, because the market is liquid at A price, but in real estate it is like Chinese water torture because real estate in NOT liquid. You can't sell it and be cashed out in a few seconds, think a few months if your lucky. I listened to the Schiff piece and snippets of the others. I agree with some of Peter's comments. On the others: I will say Japan has been on a downward spiral for over 20 years because of basic demographics. We are potentially heading the same way for the same reason, demographics, and China is heading full speed ahead to the same issue demographics. I will disagree with some of the other assertions. We can not have a collapse until the majority of a people can be negatively affected. That is the behavior of a collapse.
Kaptainsteve August 24, 2012 at 11:25 PM
R, I agree especially when you say that "a collapse can not occur when there are still greedy people with money or available credit that could be invested or used to buy assets. It is when and ONLY when there is no easily available capital or credit left, then the prices crash." In fact, this is exactly what Keiser says is ready to happen. And, as far as the masses being negatively affected, 50% of the people receive some kind of gubbie bennies, 1 in 7 is on food stamps. People are losing their homes and whole cities have been boarded up. People are being negatively affected. I have no problem with anything you said and only disagree with one detail, degree or how far down the road we have already traveled. We both agree that we are no longer on paved highway. But you say we are on a dirt road. I say we are in the weeds and the bushes at night, the headlights are busted and we are ready to hit a tree, a boulder or go over a cliff. R, good luck and buy silver.

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