Home ownership in decline
We all know that home ownership is not the great investment it used to be. The giddy days of 20 and 30 percent annual appreciation have been replaced with declining home values or at the very least stagnation. But are Americans returning to pre World War II days where the majority of families were renters or are we just living through a little real estate reset?
In early October the U.S. Census Bureau released statistics on home ownership changes during the last 10 years. The census report indicates the rate of home ownership in the U.S. fell in the last decade by the largest amount since the Great Depression. Between 2000 and 2010, the percentage of owner occupied housing units declined by 1.1 percent to 65.1 percent.
However, a statistician at the Census Bureau says the decline is actually worse than it appears. During the middle of the decade home ownership was up to almost 70 percent, therefore, the crash from that peak was a more dramatic 4 percent over five years. In spite of this, the percentage of Americans who own their own homes remains the second highest on record, with owners outnumbering renters in all but 1.5 percent of the nation's 3,143 counties.
That being said, few residents of major cities own their own homes, primarily because of much higher prices. For example, in New York City, renters make up 69 percent of households, followed by 61.8 percent in Los Angeles and 55.1 percent in Chicago. The age of home owners is also impacted by the decline in ownership, especially among the 35 to 44 year old age group, where the home ownership rate fell from 66.2 percent to 62.3 percent. Unfortunately, the number of people renting is expected to increase as the real estate slump continues and mortgage qualification remains at a high level.
Although the decline has affected all areas of the country, some were hit harder than others. The West had the lowest home ownership rate at 60.5 percent and the Midwest had the highest at 69.2 percent. The South came in at 66.7 percent and the Northeast at 62.2 percent.
New York state had the lowest homeownership rate of 53.3 percent and the District of Columbia was even lower at 42 percent. There were a few bright spots around the country with West Virginia leading the pack at 73.4 percent homeownership and Minnesota, Michigan, Delaware and Iowa all above 70 percent.
For some reason, I don't find the decline in home ownership as disturbing as its being presented. After all, the increase in home ownership during the last 10 years, and primarily during the last six, was a direct result of the abundance of subprime mortgages being written. People were given Fannie Mae and Freddie Mac backed mortgages on homes that they really weren't qualified to purchase, artificially inflating the percentage of owner occupied houses in the country.
And don't forget that this market offers opportunities for buyers and investors with cash or the ability to get financing never before available in this generation. After all, where are all those new renters going to live? Someone has to own the property before it can be rented.
Is the American dream dead? Not by a long shot. The dream is just waking up from a nightmare and getting ready to move on in the light of a new, slightly less insane day.