Homeownership down, but not out

homeownership graphic

Since the housing meltdown and resulting change in lending standards, it has been more difficult to obtain a mortgage to buy a home.

So maybe it’s not all that surprising that the Harvard Joint Center for Housing Studies tells us that the homeownership rate in the U.S. is down at its lowest level in nearly a half-century. In its annual housing report, the center says the decade-long declines are especially large among the age groups in the prime first-time home-buying years – namely, Millennials.

homeownership chart

The recent declines in homeownership have more than offset earlier gains, leaving age-specific rates for all but the oldest households significantly lower than in 1995. But the Harvard researchers see a break in the gloomy clouds.

They find the forces behind this trend should moderate over the next few years. The decline in foreclosures should be a big help.

Foreclosures took a toll

CoreLogic estimates that more than 9.4 million homes – the majority owner-occupied – were lost to foreclosures, short sales, and deeds-in-lieu of foreclosure from the start of the housing crash in 2007 through 2015.

While completed foreclosures have slowed considerably, Mortgage Bankers Association (MBA) data indicate that the share of loans that are seriously delinquent – 90 or more days past due or in foreclosure – has also fallen sharply. However, numbers are still higher than before the crash.

Downward pressure on homeownership

“By many measures, the U.S. housing market has recovered substantially from the crash,” the Harvard researchers write. “According to CoreLogic estimates, nominal home prices were back within 6% of their previous peak in early 2016, although still down nearly 20 percent in real terms.”

But that small uptick in prices has helped millions of homeowners build a little more equity, in some cases getting back to a positive equity position. The decline in delinquency rates means there may be fewer foreclosures hitting the market in the future, helping hard-hit markets regain stability.

The biggest negative is a growing shortage of homes, exacerbated by a huge fall-off in home construction in the last decade. At 1.1 million units, new home construction was still running near historic lows last year.

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