Mortgage rates have crept a bit higher, but by historical standards borrowing to buy a home is quite a bargain, as it has been since before the recession. So, with the recovery well underway, more and more people are opting for homeownership, right?
Not so. In fact, the U.S. homeownership rate in the first quarter of 2015 fell to 63.7 percent—the lowest level in more than two decades.
The trend of declining homeownership is not new—it began some eight years ago—but the fact it has not abated with the strengthening economy is striking.
What explains the falling rate of homeownership? A new study from the Joint Center for Housing Studies of Harvard University identifies several factors behind this trend.
One is the erosion of household incomes since the start of the recession in 2007. Low mortgage rates are no help to someone who simply cannot afford to buy a home.
Another factor is restricted access to financing. “Facing heightened costs from delinquent loans, lenders are reluctant to lend to borrowers with less than stellar credit,” the researchers state.
The report also notes what it terms the slow transition to homeownership by the millennial generation. This, in part, could be a matter of choice, but the researchers say this generation also faces financial hurdles.
Rochester long has been known for its housing affordability compared with other metro areas. Yet the rate of homeownership also has fallen here, from 69.4 percent in 2006 to 66.7 percent in 2013.
The Harvard report says there is a flip side of falling demand for owner-occupied housing—“exceptionally strong” demand for rental units. That has caused rents to rise much more sharply than the inflation rate.
The impact has been felt here. Measured by median gross rent as a percentage of household income, Rochester is less affordable for renters than places like Los Angeles, New York City and Washington, D.C.
To grow the local economy, housing affordability is vitally important. It’s not an easy problem to fix, but we certainly should try.
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