Home ownership rates in the US rebounded a bit in 2017, but remain near historically low levels. This is a source of concern for a number of reasons: home ownership is a savings vehicle that has worked for a number of households over time; being a homeowner encourages people to look after and contribute to their neighborhoods; and home ownership is part of that loose vision of the good life sometimes called the “American dream.” I’ll draw on evidence presented in The State of the Nation’s Housing 2018he State of the Nation’s Housing 2018 For those who want an overview of US housing markets, including issues of rental markets and low-income affordability, it’s a good place to start. Here, I’ll focus on home ownership patterns.
As a starting point, here are a couple of figures showing home ownership by age and by race/ethnicity. After the peak of prices in the housing market back around 2006, the rate of home ownership doesn’t change too much for the over-65 age bracket–many of whom were presumably already well-settled into homeownership many years before 2006–but drops visibly for every other age group. The biggest drops are for the younger age groups. Homeownership drops for every racial/ethic group, as well. But for blacks in particular, the drop is severe enough that homeownership rates are near their low point for the last four decades.
Interest rates for mortgage borrowing are relatively low by historical standards, so that isn’t the issue. Instead, the main issue seems to involve the high price for purchasinghousing, and probably also some concerns about the desirability of being a homeowner having just watched the housing price decline in the lead-up to the Great Recession. The Harvard report offers some backstory:
“In 1988, when the first State of the Nation’s Housing report highlighted historically high homeownership costs, the national home price-to-incomeratio was 3.2, with just one metro posting a ratio above 6.0. In 2017, the national price-to-income ratio stood at 4.2, and 22 metros had ratios above 6.0. So far, however, low interest rates have kept the median monthly payments on a modest home relatively affordable—in fact $250 lower in real terms than in 1988. However, the ongoing rise in both interest rates and home prices may change this. In addition, higher prices mean higher downpayments and closing costs, an even more difficult hurdle than monthly payments for many first-time homebuyers.”
