It’s hardly a surprise that the homeownership number continues to backpedal in today’s wobbly real estate market and tight mortgage milieu.
Foreclosures mercilessly push borrowers from their homes and this trend seemingly will continue for several more years as another 5-6 million homeowners could face the same fate. The recent $25 billion controversial settlement with mortgage loan servicers over alleged shady practices will predictably lead to home loan lenders accelerating court filings on delinquent borrowers. Mortgage money is very affordable but helps little when strict underwriting standards erode borrower approval chances. Inventory levels in many housing markets – like Las Vegas - are low keeping home buyers on the fence.
The Census Bureau reported that U.S. homeownership rate declined to 65.4% in the first quarter, tumbling a full point from the same time period a year ago. In comparison, it clocked in at 69.2% in the second quarter of 2004, an all-time record. In fact, it hasn’t been this far down since quarter one in 1997. Looking at historical metrics and present economic and housing trends it appears the number will settle somewhere between 60 – 64% when this turmoil comes to an end. Some real estate industry authorities claim it’ll stay there for a long time, too.
The apartment industry is one housing sector that is taking all this in with open arms. People rent because they have to save longer for the required down payment. They have to get their credit score to where it qualifies them for a mortgage loan, so they rent. Foreclosed borrowers need a roof over their heads. Many just want to see the residential market to improve from where it is now before jumping in.
According to Reis, Inc. – a New York commercial real estate information boutique – apartment vacancy rate in U.S. slipped to 4.9% in the first quarter which is the lowest since 2001. With supply slow to catch up to the increased demand a steady upward pressure on rents will undoubtedly make apartment management firms tally up nice profits. Soon, though, more apartments and other rental units will be introduced to the housing marketplace to balance things out.
Obviously a fundamental shift is underway in the housing and mortgage industries that will keep policy makers in Washington on their toes for the foreseeable future.