Owning a home has been the one of the most traditional aspects of the American Dream, but that dream was shattered by the bursting of the housing bubble in 2008. Since that time, entire households have given up on the dream by allowing their homes to go into foreclosure, flocking to rental properties in major metropolitan areas, moving in with relatives, and generally showing apathy towards the real estate market.
The housing economy in the United States has shown clear signs of recovery over the last twelve months, but a new report released by Commerce Department shows that Americans are still not convinced that homeownership is worth looking into again. The homeownership rate in the U.S. is currently at 65.5 percent. That's almost a full percentage point lower than last year, but it was the same as the previous quarter.
Looking for a Bottom
Just like the falling real estate prices of the last few years, economists and investment analysts have been hoping for the homeownership rate to stop its descent. Record-low mortgage interest rates and rock-bottom housing prices in most real estate markets over the last year or so should have enticed house hunters to pursue homeownership once again, but the enticement has not been enough.
The housing bonanza of the early 21st century pushed the homeownership rate up to 70 percent. The economy certainly enjoyed the fruits of widespread homeownership, but the last few years have disappointed in this regard. The report from the Commerce Department also showed that the rental market is doing quite well, with vacancies down more than one percentage point since last year.
Economists and real estate analysts have been looking for a bottom in the falling homeownership rate, and they are hopeful that recent upticks in new residential construction and existing home sales will signal the end of the free fall.
Making Homeownership Possible
Boosting the homeownership rate will not be a simple matter of marketing. Given the Federal Reserve Bank's commitment to keep mortgage interest rates low and the sharply reduced housing prices in most of the country, it is perplexing to think that home shoppers are staying put. The problem resides in the tight conditions currently hampering the credit and lending markets.
The proverbial financial comparison of buying vs. renting is now clearly in favor of homeownership, but the ability to get a mortgage has been sharply reduced. There is also the fact that Americans are now factoring in risk when weighing their housing options. In this regard, residential lease agreements do not feature as many caveats or loopholes as mortgages, and they are not as risky.