Owner Ranks Fall
As Credit Woes
Hurt Housing
By RUTH SIMON
July 31, 2007
The nation's homeownership rate has declined to its lowest level since 2003, the latest sign that the mortgage industry's ills are taking a toll on the housing market.
New data released by the Census Bureau this month put the share of American households that own their own homes at 68.4% in the second quarter. The homeownership rate, which peaked at 69.4% three years ago, has declined steadily over the last three quarters, on a seasonally adjusted basis. Economists say it could drop further over the next two years.
The homeownership rate fell most sharply for blacks. It dropped 3.4 percentage points over the last three years to 46.3% in the second quarter.
The Census Bureau report did contain one bit of good news for the housing market: The number of vacant homes for sale dipped to 2.04 million in the second quarter from a record 2.18 million in the first quarter. "Vacancies are definitely peaking," says Mark Zandi, chief economist of Moody's Economy.com. But he cautions that the census figures are based on a small sample and can be volatile. "I wouldn't be surprised" if the vacancy rate increases again in the third quarter, he says.
The latest decline in the homeownership rate comes as mortgage lenders continue to tighten their standards, making it more difficult for people to purchase a home with little or no money down, for example. Among those hit hardest by the latest changes are first-time home buyers, who often have trouble coming up with a down payment. Lenders have also sharply cut back on loans to subprime borrowers, or those with scuffed credit.
There's no doubt "that the dip in the homeownership rate...is at least partly the result of tighter credit," says Thomas Lawler, an independent housing economist. He expects the share of Americans owning their homes to drop to 67% over the next two years in the face of tighter lending standards and rising foreclosures. Some economists say the impact of tighter standards could be at least partially offset by falling home prices.
The homeownership rate began climbing in the mid-1990s, propelled by moderate interest rates and strong economic growth. It moved higher still in the first half of this decade, helped along by low interest rates, creative mortgage financing and the desire of many Americans to get in on the housing boom.
But the share of Americans owning their homes began to dip as declining affordability made it tougher for some would-be buyers to get into the market.
As Credit Woes
Hurt Housing
By RUTH SIMON
July 31, 2007
The nation's homeownership rate has declined to its lowest level since 2003, the latest sign that the mortgage industry's ills are taking a toll on the housing market.
New data released by the Census Bureau this month put the share of American households that own their own homes at 68.4% in the second quarter. The homeownership rate, which peaked at 69.4% three years ago, has declined steadily over the last three quarters, on a seasonally adjusted basis. Economists say it could drop further over the next two years.
The homeownership rate fell most sharply for blacks. It dropped 3.4 percentage points over the last three years to 46.3% in the second quarter.
The Census Bureau report did contain one bit of good news for the housing market: The number of vacant homes for sale dipped to 2.04 million in the second quarter from a record 2.18 million in the first quarter. "Vacancies are definitely peaking," says Mark Zandi, chief economist of Moody's Economy.com. But he cautions that the census figures are based on a small sample and can be volatile. "I wouldn't be surprised" if the vacancy rate increases again in the third quarter, he says.
The latest decline in the homeownership rate comes as mortgage lenders continue to tighten their standards, making it more difficult for people to purchase a home with little or no money down, for example. Among those hit hardest by the latest changes are first-time home buyers, who often have trouble coming up with a down payment. Lenders have also sharply cut back on loans to subprime borrowers, or those with scuffed credit.
There's no doubt "that the dip in the homeownership rate...is at least partly the result of tighter credit," says Thomas Lawler, an independent housing economist. He expects the share of Americans owning their homes to drop to 67% over the next two years in the face of tighter lending standards and rising foreclosures. Some economists say the impact of tighter standards could be at least partially offset by falling home prices.
The homeownership rate began climbing in the mid-1990s, propelled by moderate interest rates and strong economic growth. It moved higher still in the first half of this decade, helped along by low interest rates, creative mortgage financing and the desire of many Americans to get in on the housing boom.
But the share of Americans owning their homes began to dip as declining affordability made it tougher for some would-be buyers to get into the market.
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