Back to renting: NYT sees sharp drop in homeownership levels

The New York Times reports tonight that levels of homeownership have dropped sharply since 2005, wiping out all the gains of the Bush-era push for expanded homeownership: "Driven largely by the surge in foreclosures and an unsettled housing market, Americans are renting apartments and houses at the highest level since President Bush started a campaign to expand homeownership in 2002."

More: "The percentage of households headed by homeowners, which soared to a record 69.1 percent in 2005, fell to 67.8 percent this year, the sharpest decline in 20 years, according to census data through the end of March. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent. ... 'We’re not going to see homeownership rates like that for a generation,' said economist Mark Zandi."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Comments

[JK]

'We’re not going to see homeownership rates like that for a generation,' said economist Mark Zandi."

Let's hope so. People earning $12/hr buying $500,000 homes should never happen again.

[yourkillingmelarry]

We have a long way to go in this housing correction. California still has over 700k alt-a option arms to reset the bulk of which won't happen until 2009 into 2010. According to Fitch 80% of these loans are making the minimum payment so yes the payments will shoot up and we will see more foreclosures.

With that said Mark Zandi's quote......... 'We’re not going to see homeownership rates like that for a generation,'.......really begins to hit home. What will be the long term psychological damage of the institution of home ownership after witnessing an entire generation of home buyers literally get wiped out?? It is too early to determine at this point. There is still today "bubble sentiment" that lingers in the market. That will disappear as the true scope of this correction takes hold. After markets experience these types of events history shows it takes many many years to heal. The Dow did not reach its 1929 highs until 1958 (thereabouts). It took that long until people felt safe putting there money back in the market. RE is different because you live in it but it will be interesting to see how people view RE after this plays out.

[sjen]

This article validates my comment months ago regarding rental rates in LA. It was a big debate on the down turn of housing's effect on rental.

Based on my experience appraising real estate since the last down turn to present, I stated that the rents (both apartment units or SFR rental) would not go down due to demand from ex-homeowners and existing renters sitting on the fence (from tightening of lending practice to fear of further devaluation).

There were quite a few doomsayers immediately opposing my statement with great passion saying that if housing went down, everything else went with it.

One noticeable effect on occupancy rate in LA area is employment. The last down turn was in part due to aerospace industry's massive lay-off. It affected rental units as well. This time, there hasn't any talk of massive lay-off from any dominating industry therefore LA's rental occupancy should be relatively stable for the time being.

[Nick]

It's like a first grade economics lesson. If you increase home ownership purely through exotic loan products, tax breaks, and fraud, and don't actually increase salaries or decrease housing costs, eventually the bubble you created will correct itself, and you'll be back where you started. You might as well just make up statistics for home ownership instead; lots less pain and work for everyone involved.

On the upside, at least the trillion dollar debacle will have taught our government a lesson (at a huge financial and emotional cost to the American people), and we won't have idiot politicians encouraging or proposing 97% LTV taxpayer-backed loans, new tax breaks for buying houses, or any other government meddling and spending into the housing market. Perhaps even some government agencies such as the Fed will set a good example of how to openly, honestly, and transparently account for MBS's on their books. I mean, we spent a trillion dollars and 5 years of negative real growth, you'd have to be a moron to repeat the SAME STUPID MISTAKES which got us into this problem...

... I'm looking at you, Dodd...
... and the other blithering morons in Congress...
... and all the other bailout proponents...
... and the FHA...
... and you, Benny Bernake...

[Anon.]

Hooray for the 6 years of the ownership society!

[sheila]

what do you expect from a "CEO President" who ran everything he touched into the ground? From a "War President" who had never been outside the US before his reign of terror and who went AWOL even from the cushy military gig he got from Daddy instead of serving his country? From a Born Again dry drunk who insists that God speaks to him directly? From a Male Yale cheerleader, for chrissakes?

The only thing this guy ever did right was to build the Crawford Ranch with lots of "green" elements like solar panels, but that is, paradoxically, something he has fought very hard against for the rest of us - to perpetuate Big Energy monopolies and to prevent us mere mortals from installing solar and mini-wind on our own houses, and to be fairly compensated for the energy we provide.

So, yeah, no big surprise that his warped, delusional and poorly-executed "home ownership" push just resulted in a few hundred new billionaire hedge fund guys (his "Base"), a distraction from his incredibly corrupt and incompetent administration of his duties, and a massive meltdown in the US economy, the environment, and our reputation in the world. and we haven't even TOUCHED on the insanity of his deficit spending and devaluation of our currency yet - those bombshells are coming next.

if he's the CEO President, give me the Temp Receptionist President every time.

[SoCalJim]

Not surprising at all. Stating the obvious. I see no reason to buy unless you absolutely have to. Fortunately, interest and dividends pay all of my living expenses in a nice part of OC, and a high salary is icing on the cake. I can easily buy, but choose not to since I have such a good deal at someone else's expense (I know the owner is taking a huge hit) Housing costs would be 200-300% what I pay now. It makes no sense if you can rent the same house for half the price. You don't spend $$$ on a house for a tax deduction, especially when AMT knocks out the property tax deduction anyway. The renting trend will only continue as the non-upper class gets booted from houses they never should have bought while putting their families in jeopardy, and back to rentals where they should have been in the first place. Pressure will only increase as prices continue a steep decline, unemployment increases, and inflation kicks most working class families in the rear. Get used to it. Rough times are ahead, and a correction is long overdue. As they say, housing is not like stocks - you cannot sell when you want to. Rather, housing is like an ocean liner - takes a long time to change direction, and we are only half way to making the turn.

[RB]

I am glad someone is finally getting back to the crux of the issue: the Bush administrations push to con people into buying homes and creating the illusion of prosperity. Sure, a lot of people (particularly readers of this blog) saw the ruse for exactly what it was, but just think off all those Americans that bought into the myth of WMDs. It was the bastardized American Dream.

[Rich]

Our long experience with American banks and credit is that as soon as there's competition everyone lowers their standards again. I expect to see all those foreclosed homes end up being owned rather than rented in just a couple of years when the prices fall to a reasonable ratio of income. In fact, I would expect to see a lot of new owners be people who got foreclosed earlier--there seems to be no black mark on one's credit rating that sticks for any length of time any more...