The nation's homeownership rate may sink and stay low, CNBC reports, with recent turmoil in the housing market not just temporarily souring consumers on home purchases but leading to a long-term shift in the national outlook.
Buying a home is a long-term commitment, the source notes, and consumers are rethinking the wisdom of such extensive financial investment in light of the market's recent, troubled history. One expert cited the discouraged view of long-term commitments as a factor contributing to low home prices, which fell beyond expectations through September.
Recent data from the Mortgage Bankers Association indicates mortgage applications dropped for three consecutive weeks in November Meanwhile, the organization's quarterly report on delinquencies and foreclosures found the former dropper to its lowest level since the fourth quarter of 2008 and the latter rose in the third quarter. The delinquency figure is also flawed, because while total delinquencies fell, serious delinquencies actually increased four basis points during the quarter.
Analysts with the firm John Burns Real Estate Consulting told CNBC they expect to see the homeownership rate continue to drop through 2015, possibly reaching as low as 62 percent. A big enough drop might take the national homeownership rate below all-time recorded levels to lows not experienced since the Census Bureau began keeping records in 1963.
Given that homeownership was up to 70 percent in 2005, this downward swing is a major change, CNBC states. The analysts break down the overall trend, saying the effects of distressed properties account for about 5.6 percent of the drop, while 3 percent is due to low consumer confidence, a weak economy and tightening mortgage financing standards.
These trends, the analysts say, are cyclical, and will come around in time. When they do, the experts predict the homeownership rate will rise again, possible getting back up to 67 percent as soon as 2025. The news source notes this analysis, while taking into account foreclosures and formerly delinquent borrowers, does not mention negative equity.
According to another expert, there are likely to be more borrowers with negative or very low equity if home prices continue falling. They may be as much as 30 percent or more underwater, and the inability of those owners to sell may have lingering effects on the market even as other difficulties are resolved. John Burns noted homeowners and renters will need time to save before they are prepared to buy a home or move to a larger home than their current one, and that it will take time for the troubled housing market to recede from memory even after conditions begin to improve.