The mortgage and real estate markets are in the midst of a major overhaul on the heels of the current housing embarrassment. The home loan sector has already seen major regulatory changes, some needed and some of dubious value. And in this climate of political gamesmanship and Wall Street lobbying more is conceivably on the way to favor large financial institutions. Mortgage lenders have also tightened considerably underwriting standards to align their operations to better handle the new market realities.
The economically significant housing sector is absorbing changes unimagined just a few years ago. One of them is the fact that homeownership is on a downward slide. The recent New York Fed's study points out that homeownership crested at a respectable 69% in 2006 and now stands at 67.3%. At this point it's down only fractionally, but this meltdown still seems to have enough legs to go another year or two. Perhaps even longer. As a result it probably will sink several more percentage points.
Homeowners being upside down - the disturbingly unpleasant experience when the mortgage balance exceeds the home's value - on their property is the underlying cause here. This has actually become a major impediment to the entire real estate market's recovery plan. According to Zillow.com, to date homeowners have lost $5.9 trillion in value since the housing market topped out in March of 2006. Any time the worth of a major asset class nosedives like this there will be serious consequences on many fronts.
Southern Nevada - with communities like Las Vegas, Henderson, Mountains Edge, Anthem, Rhodes Ranch, Silverstone Ranch, Mesquite, Summerlin and Anthem - homeownership rate over time is likely to take an even bigger hit than the national average. The real estate market here is in the grip of its worst slump in memory, easily qualifying it as one of the worst around. It puts more downhill pressure on the curve, bending it to where it hasn't been in a long while.
Many present upside down, or underwater, homeowners on a national scale will turn into tenants. Typically they expect to find the roof for over their head more affordable in an apartment or a rental home. This probably is true in many areas in today's real estate market.
Yet, for instance in Las Vegas home values in the lower end of the market have dropped to the 1990s levels, making them totally attractive. Couple that with the low cost of mortgage money and real opportunities abound all over the place. Now, the challenge is how do these underwater homeowners dispose of their existing property and still be able to qualify for a new mortgage.
Homeownership will continue declining for the foreseeable future, only to stabilize when most of the mortgage foreclosure traffic is brought under control. It'll probably one day claim back some of the lost ground, but reaching the 2006 high again appears to be a distant dream.