The housing market has made significant strides in the last year with regard to home sales and home prices. However, even with housing’s good news, the homeownership rate continues to be at generational lows. Economists and real estate professionals are stumped.
The homeownership rate for the first quarter of 2017, reported by the U.S. Census Bureau was 63.6 percent. This is a slight improvement from homeownership rate recorded in 2016. However, in their analysis, the Census Bureau stated that when the rate is adjusted for “seasonal variation,” there was no statistical difference from the 63.5 percent rate in the last quarter of 2016.
The homeownership rate peaked at 69.2 percent in 2005, but has steadily declined since the Great Recession. Industry experts have been flummoxed as to why there have not been more home buyers taking advantage of historically low interest rates in an upward economy. (Freddie Mac reported last week that the national average interest rate for a 30 year fixed rate mortgage was 3.94 percent; freddiemac.com). Even mortgage lending has become looser, as some mortgage companies have rolled out low and no-down payment programs in recent months.
So why is there lack of interest in homeownership? A recent study co-sponsored by the Fisher Center for Real Estate and Urban Economics, UC Berkley and the Rosen consulting Group asserted to have the answer to this question. According to a NAR press release (realtor.org), the study was announced this month in honor of National Homeownership Month, and presented at the National Association of Realtors Sustainable Homeownership Conference.
The authors discussed regulatory issues that has hindered housing and mortgage lending. They also identified issues affecting would-be home buyers, which include: student debt; availability of mortgages; housing affordability; low home sale inventory; and “post-foreclosure stress disorder.”
You may already have heard much about regulatory issues, consumer debt, mortgages, affordability, and low housing inventory. But, what is “post-foreclosure stress disorder?” The Rosen Consulting Group coined the phrase to give a name to the concept of perceived home buying risks derived from a financial crisis.
Even though a number of consumer surveys continue to indicate a strong positive sentiment towards homeownership, the authors point to post-foreclosure stress disorder as a major influence on home buying decisions. They believe that many individuals have been directly and indirectly affected by the Great Recession, and therefore have changed their behaviors based on perceived financial risks. And the greater the financial risk, the greater the caution exercised. They claim this is confirmed by a Federal Reserve survey where 80 percent of respondents indicated they would like to own a home someday, but only one in six who were financially able to purchase a home felt that renting was the best choice for now. Post-foreclosure stress disorder may also account for a major shift in lifestyles
. Even though surveys have indicated that millennials are expected to be the largest group of homebuyers, many millennials don’t want to be anchored to one area by their home. There is a shift away from the old standard of being house-centric to mobility. Millennials like the freedom of being able to move about without the burden of having to sell a home.
Dan Krell is a Realtor® with RE/MAX All Pro in Rockville, MD. You can access more information at www.DanKrell.com.