Foreclosure for Sale Pulled Down Nationwide Home Ownership

by Peter Vernon on Foreclosures

The national rate of home ownership dropped for the second quarter this year, showing once more that foreclosure is still a force to reckon with in the current housing market.

The home ownership rate rose nationally to record high in 2005, but started to drop when the foreclosure for sale spread like wildfire across the country. The national home ownership rate peaked at 69 percent in 2004 and declined by 67.4 percent last quarter.

For those who are not familiar with the housing market, the decline may just be a small amount but each percentage point is equal to about 1 million people.

According to industry analysts, many homeowners who lost their properties to foreclosures ended up becoming renters, with many more moving in with their relatives or friends.

Analysts said that the current home ownership trend is not temporary. They explained that the collapse of the housing market, the difficulty in obtaining credit and demographic changes contributed to the drop in home ownership rate and the rise in the number of people who rent.

They pointed out that in the long-run, landlords will benefit from the current trend as home ownership rate is expected to return to levels seen 20 or 30 years ago.

Arthur Nelson, a professor at the University of Utah, estimated that the rate of home ownership will drop in the next 20 years by nearly 64 percent, similar to the 1990 level or lower, but will not drop below 60 percent.

He explained that people who are 75 years or older prefer to rent rather than buy houses when they move. He pointed out that this age group is increasing in size faster and will double in numbers in the next two decades.

Another reason cited by Nelson for the projected drop in home ownership is the return of stricter lending standards, including a 20 percent deposit. Some analysts agree with Nelson's projection, adding that home ownership seems to have a two-thirds natural limit.

However, many analysts believe that there is a possibility that the natural limit may change, citing the home ownership rate of 65 percent which was the average from 1965 to 1995. They claimed that the average home ownership rate before those years was much lower.

And compounding the problem in the drop of home ownership rate is the expected rise in foreclosures as the growing number of homeowners who lost their jobs is starting to run out of funds to pay their mortgages.

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