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Home ownership rate falling to sustainable levels

By: 23 July 2011 4 Comments

According to a report from the national Mortgage Bankers Association’s Research Institute for Housing America, home ownership rates in the country hit a high of 69.2 percent in 2005 and have fallen steadily since.

In fact, the Institute said home ownership rates had fallen to 66.2 percent by the first quarter of this year and are projected to go lower and may eventually settle in at 2000 levels.

That doesn’t sound great, does it? The truth of the matter is, the home ownership rate in 2000 was one of the highest in the world. The Economist, in 2002, released a report stating the home ownership rate in the United States was 65 percent – tied with Belgium for the seventh highest rate in the world. Ireland boasted the highest ownership rate in 2000 at 83 percent, followed by Italy (78 percent), Australia and the United Kingdom (69 percent) and Canada and Finland (67 percent).

The Institute reports the 65 percent home ownership rate had pretty well held from the mid-60s through the first of 2000 and was regarded as stable. That stable rate placed the U.S. at seventh in the world in terms of the percentage of the population owning homes and returning to that level of stability and ownership isn’t a bad thing at all.

According to the Institute, some sketchy lending practices by a number of institutions led to the record ownership rate of 69.2 percent. We all know what happened next – it became quite obvious that some borrowers simply couldn’t meet their loan obligations, resulting in a rash of foreclosures. Since a good number of those troublesome loans were of the subprime variety, we can assume that foreclosures will be a problem through the first half of next year.

Why? Many subprime loans featured great introductory rates that were followed by terms that would kick in within, generally, five years. An adjustable rate mortgage, for example, might feature a very low interest rate and mortgage payment, but the interest rate would reset in five years and those payments might be out of the range of the borrower.

That being the case, we’ve got more than a few resets in the pipeline and that will be the case through the first half of 2012 as subprime mortgages were being written through the first part of 2007.

At any rate, getting back to a sustainable home ownership rate that is achieved through a mortgage system based on loans given to people who can afford to pay them back is a fine state of affairs. That’s doubly true when one realizes that sustainable rate of 2000 represented one of the highest ownership rates in the world.

There is little doubt that the national mortgage industry is going through a number of changes right now. If the Institute is right, however, we’ll settle back to having a sustainable home ownership rate that is among the highest in the world.

That’s not bad at all.
Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

4 Comments »

  • mickflynn said:

    The author of this report is drinking the Kool-Aid. He has no idea what a sustainable level is and the govt sure as f**k doesn’t either.

  • Scott said:

    The Government said, back in 2007, that the housing market would go thru a normal slowdown, make a soft landing, and have no detrimental effects to the overall economy. The government said that with the most recent TRILLION dollar,(borrowed money), stimulous package that we would avoid going over 8% unemployment. Does ANYBODY out there still believe anything that these clowns say??

  • Ethan C. Nobles (author) said:

    Mick — you may well be right. Please explain. And, no, I’m not being coy — one of the problems with analyzing housing markets these days is that there is very little going on in the way of frank, honest discussion. Groups that have a vested interest in either maintaining the status quo or putting more of the same policies that got us in the trouble in the first place dominate the discussion.

    If you’ve got some unique insight on this issue, please share it.

    Scott — Yes, people still believe what the government tells them. Worse yet, they believe people running for office who promise broad-sweeping reform when the reality is they’re available to the highest bidders.

    Sad state of affairs.

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