Is Home Ownership Becoming Too Exclusive?

The home ownership rate dipped to 65.1 percent in the second quarter, falling to the lowest level since the fourth quarter of 1995, the Census Bureau reported Tuesday. The drop coincides with efforts by consumer groups and lawmakers to try to make home ownership more inclusive, particularly at a time when affordability is still high.

In 2004, the U.S. home ownership rate soared to a record 69.2 percent. But the home ownership rate will likely reach bottom at about 64 percent in the next year due to the high number of foreclosures in the pipeline and rise in rental homes, Capital Economics Inc. analysts predict.

Meanwhile, lawmakers and consumer groups are trying to make home ownership more within reach to more families.

For example, “regulators are close to proposing a softened version of a rule requiring banks to keep a stake in risky mortgages they securitize,” Bloomberg reports. “Lawmakers currently shaping housing finance are seeking to reduce the government's role in keeping rates affordable for riskier borrowers while ensuring home ownership is within reach of minorities and first-time buyers who could be needed to sustain the housing recovery as borrowing costs rise from record lows.”

First-time buyers and minorities have seen some of the largest declines in home ownership rates. For example, the home ownership rate for blacks dropped to 42.9 percent in the second quarter of this year, compared with nearly 50 percent in the second quarter of 2004. Meanwhile, first-time buyers -- who are often in their 20s or early 30s -- have been at a disadvantage because of limited assets to come up with down payments and trying to meet tighter underwriting standards.

While the industry wants to encourage home ownership, it is moving cautiously to avoid repeating past mistakes, in which exotic adjustable rate mortgages and low down payments fueled a large housing bubble that eventually caused about 7 million people to lose their homes to foreclosure.

Source: “Homeownership Rate at Its Lowest Since 1995,” Reuters (July 30, 2013) and “Efforts under way to boost low home ownership rate,” Bloomberg News (July 30, 2013)