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10/15/2013

Home Ownership Will Change In Days Ahead

A couple of weeks ago we reported on how the housing bubble has affected the economy. Let�s now take a look forward, by surmising that a future housing turnaround occurs. What will it look like, and how will it differ from the past? We could well see a home-price recovery without a home-ownership recovery. And here�s why:

Investors (pools of credit-worthy individuals who wish to become landlords) are the biggest change now underway, regarding today�s home purchases. So if prices rebound, the home-ownership rate, which peaked at 69% in the third quarter of 2006, will likely keep falling. The rate is presently 65.4%,  but John Burns, president of John Burns Real Estate Consulting, anticipates it hitting 62.9% by 2015 � the lowest since records have been kept. Burns claims there is no way we�re going back to the 69% peak, because many first-time buyers during that boom weren�t qualified to own the homes they had purchased.

The lower home-ownership rate will have broad economic implications, because home equity will be a less-critical part of household wealth in the future. But on the positive side, fewer, less-leveraged individual homeowners will pose less risk to banks and taxpayers who backstop housing. Another positive effect from rising prices will be a boost in construction, as recent new-home sales showed unsold inventory at its lowest since the early 1960s. In short, a home-price recovery without a home-ownership recovery is a definite possibility.



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