Homeownership Rate Falls to Lowest Level Since 1997; The Homeownership Bubble Is Still Deflating
Conclusion: The political obsession with homeownership in the 1990s and early 2000s raised homeownership in the short run to an artificial and unsustainable level of 69% by 2004, but failed in the long run to create a homeownership rate that was sustaintable. In the process, numerous government policies turned good renters into bad homeowners, created a housing bubble, waves of foreclosures, and a subsequent housing meltdown and financial crisis. In other words, the chart illustrates how government policies (monetary, mortgage market, GSEs, CRA, affordable housing, etc.) created an unsustainable "homeownership bubble" that is still deflating. It's likely that the homeownership rate will continue to fall for at least several more years, until we eventually get back to the more sustainable 64-65% homeownership rate that prevailed from 1975-1995 before various government policies destabilized the U.S. housing market.
Update: The chart below shows how the U.S. homeownership rate increased from a stable rate of about 64% for almost a decade through 1994, up to historically unprecedented and unsustainable "homeownership bubble" levels above 68% between 2003-2007. At the same time, the percentage of residential mortgages with a 3% down payment or less increased from 2.3% in 1994 to almost 40% by 2007 (data from Ed Pinto). One of the primary reasons for increased homeownerhip rates above 68% was the deterioration of credit and lending standards, including significant increases in the share of home purchases with very low down payments.