Tuesday, February 16, 2010

U.S. Homeownership Falls to 10-Yr. Low of 67.2%; Bad Homeowners Return to Being Good Renters

According to data released several weeks ago by the Census Bureau, the U.S. homeownership rate fell to 67.2% in the fourth quarter of 2009, the lowest rate since 67.1% in the first quarter of 2000, almost ten years ago. Compared to the peak of 69.2% in 2004, homeownership has fallen by two full percentage points.

Many would agree that the global financial crisis, mortgage tsunami, and housing bubble can all be traced to the political obsession to increase homeownership with easy credit and government housing policies, so in that case the significant decrease in the homeownership rate to a ten-year low is probably a good thing. The political infatuation with homeownership turned thousands of good renters into bad homeowners and consequently turned the American dream into the American nightmare. The fact that bad homeowners are now returning to once again being good renters is a sign of progress.

As Robert Samuelson wrote in Newsweek (August 2008):

"We think everyone should become a homeowner, when many families can't or shouldn't. The result is to encourage lending to weak borrowers who are likely to default. The avid pursuit of a few more percentage points on the homeownership rate has condoned enormously damaging policies."

12 Comments:

At 2/16/2010 3:41 PM, Blogger juandos said...

Via the Business Insider: Coming Soon: 5 Million More Foreclosures

 
At 2/16/2010 3:56 PM, Blogger Steve said...

"Many would agree that the global financial crisis, mortgage tsunami, and housing bubble can all be traced to the political obsession to increase homeownership with easy credit and government housing policies"

And many would be wrong - what MP mentions is the subsidiary effect, not the proximate cause. Better causes of a too-high homeownership rate: Randian Central Bankers pegging too-low interest rates, originate-to-distribute securitization models coupled with lax and captured regulators, fraud by conduit creators and ratings agencies, fraud at every level of the real-estate transaction process - for starters.

Barry Ritholtz, among others, could give you 10 reasons better than a top-down desire by the Government to get people into homes. The real cause, which is probably an anathema to this site, is that a free market didn't work optimally and didn't police itself against systemic fraud and looting.

 
At 2/16/2010 4:26 PM, Blogger juandos said...

"Barry Ritholtz, among others, could give you 10 reasons better than a top-down desire by the Government to get people into homes"...

You of course have some credible links to back up your opinion, right?

I mean it wasn't due to the machinations of people like Barney Frank and the rest of the GSE/CRA supporting Democrats who the banks were competing against were the problem, right?

 
At 2/16/2010 4:27 PM, Anonymous Johnson said...

Steve - like Ritholtz, you're clearly a political idealogue and arguing about something way way beyond your expertise.

In your "investigations" do some homework about big time money manager Ritholtz...SEC filings show that he manages a whopping $16 million! You're listening to a hack.

 
At 2/16/2010 5:05 PM, Anonymous Anonymous said...

Steve said: "The real cause, which is probably an anathema to this site, is that a free market didn't work optimally and didn't police itself against systemic fraud and looting."

That's almost correct. The free market didn't work optimally because of government involvement. The "greedy" bankers wouldn't normally risk losing money on loans to high-risk borrowers, because they're greedy. However, we had Barney Frank and Chris Dodd funding the purchase of high-risk loans through Fannie Mae and Freddie Mac, thus creating a market for for high-risk lending where none had previously existed.

It is a pretty damning that pure market greed would've prevented the near collapse of the US economy brought on by trillions of dollars of well-intentioned government spending.

 
At 2/16/2010 5:09 PM, Anonymous morganovich said...

wait until april when the fed stops buying the whole mortgage market.

an extra 150bp on the mortgage rates is not going to do the real estate market any favors...

 
At 2/16/2010 11:34 PM, Anonymous Odessa Steps said...

Well, Steve, you and Barry Ritholz would be wrong.

Every day of every year people have an opportunity to engage in all the stupid and nefarious schemes you mention. But for some reason we don't have housing bubbles from runaway expectations every year.

This crisis needed a method, a motive, and an opportunity.

The METHOD were affordable housing programs. If those sorts of loans and liquidity instruments were never allowed, any bubble would have been small and short-lived.

The MOTIVE was political pandering. The fact of the matter is that the "little guy" who bought the house he couldn't afford and the carpenters who swung their hammers were just as much to blame as mortgage brokers, real estate agents, developers, banks, investment bankers, etc. It was a team effort to gain easily achieved benefits and either assume or pass along risk.

The OPPORTUNITY was a "search for yield" which resulted from global capital imbalances. This was exacerbated by artificially low interest rates but not entirely dependent upon that policy.

If we had a supercomputer which could calculate optimal home ownership rates and homebuilding based on income, employment, credit, liquidity, and mobility characteristics, we wouldn't have had a crisis. Oh, but we DID have such a supercomputer - it's called "the free market." Government altered the incentives and rent vs. Buy decisions by fueling housing markets with easy money and little accountability. It has been our national policy since the Civil War but really took off after WWII. Bill Clinton put it into overdrive in 1995 with his National Housing Policy and Bush continued it with his "ownership society."

Free markets do fail, but their failures are typically small inefficiencies. To make a really big inefficiency, you need deliberate government action.

Would you like to hear the whole list of government programs, agencies, and incentives dedicated to more home ownership or just the top ten?

 
At 2/17/2010 12:48 AM, Anonymous Lyle said...

Lets ask why the policy favored homeownership? It is quite clear homeownership leads to a more stable society, by destroying the arguement of the radicals that by workers uniting they have nothing to loose but their chains, they now have their house. Politicians say that it leads to a more stable community, but what they really mean is one less likely to get involved in riots and civil disturbances. I suspect that FDR pushed homeownership as a way to prevent the left or right from taking over in the 1930's. Recall Huey Long, or others on either side, luckily we did not have an inspired orator on either side at the time, or the US could have gone either fascist or communist. (there were a lot of folks that belonged to the communist party in the 1930s).
Homeownership also fit in as a modern version of the Jeffersonian yoeman farmer, in that at least you owned a little property.

 
At 2/17/2010 7:58 AM, Anonymous Anonymous said...

Lyle said "It is quite clear homeownership leads to a more stable society..."

I think that has the cart before the horse. Stability leads to homeownership, not the other way around.

When I was living my life basically one missed paycheck away from financial ruin, I was a renter... and rightfully so. The homeowner/landlord provided the stability. When the house needed a new roof or a serious plumbing problem occured, the homeowner could handle it. When I was "between jobs", I was able to work a deal with the homeowner instead of defaulting on what would've been a mortgage.

Once I got a hold on my finances and started spending less and saving more, home ownership became a viable option for me. I was laid off in December and my wife and I were just discussing how terrible our lives would be had we bought a house five years ago before we took control of our finances.

 
At 2/17/2010 9:44 AM, Blogger juandos said...

Is Oregon the new hot spot for home foreclosures?

Oregonians voted in PUNITIVE taxes on wealthy and businesses...

Businesses are packing their bags to leave...

 
At 2/17/2010 10:06 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 2/18/2010 5:50 AM, Anonymous Frank said...

can all be traced to the political obsession to increase home ownership with easy credit and government housing policies

****************************

And of course invest banks were the "victims" of the political housing schemes. hahaha

 

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