Home ownership in decline

Welcome to the pwnership society.

A reasonable conclusion is that only about 64% of the American public is capable of owning a home. You can't "set aside" such things as no equity. Liar's loans, NINJAs, SISAs, Option ARMs and so on were pretty much the main drivers of increased ownership--not incomes or savings, which actually fell during this period. Now that the hot air is gone, the balloon has nowhere to go but down.

I'm posting twice in a row--but this is just too good:

Take the nation's capital: Property values are so high that it can cost two to almost three times more to own than to rent, according to a recent homeownership report from the National Low Income Housing Coalition and the Center for Economic and Policy Research. Los Angeles and Boston are in a similar situation.

"In these markets, encouraging people to remain as homeowners, even with substantial write-downs from their original mortgage terms, is likely to lead to situations in which they pay far more of their income in housing costs than necessary," according to the report.

In markets where prices are way out of line, "almost anyone" would be better off renting, said Dean Baker, CEPR's co-director and co-author of the homeownership report.

http://www.marketwatch.com/news/story/high-cost-homeownership-argues-rental-aid/story.aspx?guid=%7B009768A5%2D59E3%2D4B68%2D990A%2DE53AFC738CB1%7D&dist=sp_inthis

CEPR is no fringe organization. It is the official arbiter in charge of identifying and dating recessions.

The Bush administration has known for years that there was nothing but the hot air behind these sales. Instead of stopping the wholesale disruption of the home loan system that had worked for years, the government let it go on and on until the economy of our country is crumbling. Some mortgage brokers and real estate companies made millions of dollars leading the poor saps on.

Are they giving back the ill-gained profits? No, no. That's not the American way. the American people will have to bail out the victims of this charade.

Give GWB a break on this one Barbs. Your boys and Nancy in did nothing when they took over in 06. And besides those poor saps knew what they were doing when they signed the docs.

Tom Brown's Bankstocks odd fact from boston.com.
http://www.bankstocks.com/

Odd fact: in Boston so far this year just 41% of selling homeowners have cut their asking prices, compared to 55% of sellers who cut asking prices in 2007, according to the local multiple listing service. A sign the market is finally stabilizing? Nope. Home sales in Boston fell by 32% in March from a year ago. Given the market is still sluggish and the housing slowdown has become an accepted fact, you'd think sellers wouldn't be any less reluctant to reduce their prices now than they were a year ago, right?

Possible explanations for conundrum: a) The year is still young! Wait until we get to midsummer, when families need to go ahead and relocate in time for the start of school. Then you'll see them start slashing. b) A greater percentage of homes for sale this year is foreclosures being sold by banks, who aren't so nimble (they're banks!) on the pricing side and may still be in a dream world as to what houses are really worth. I vote for b. . . .

People didn't really "own" the homes, they were just paying the mortgage. They owned the debt. Can you really call it ownership when it is the new norm to only pay while you can, and walk away leaving the bank with the title?

Er, is there a fact checker on this blog? LOL!

Center for Economic and Policy Research (CEPR) isn't the "official arbiter in charge of identifying and dating recessions". You're thinking of "NBER", the National Bureau of Economic Research.

When people can "just barely" afford their payments on their adjustable rate mortgage when the rates are low, what did they think was going to happen when interest rates rose? It's not the bank's or the government's fault they signed their name on those loans.

just me,

And you never own your home anyway. Stop paying your mortgage for a year and you will find out who owns your home. Stop paying your property taxes for a year and you will find out who owns your home. All you are doing is renting from a bank or renting from the government.

Thanks, John. A fine senior moment! I've done worse--typing in the name of the head of NEBR as Marty "Feldman." CEPR is home to Dean Baker, Stiglitz, Solow and the like!

Steve,

I think people maybe getting the point that home is not an investment. I think as more people understand that a home really is just shelter and not a piggy bank then they will get that buying a home is actually a huge liability.

For now I'll keep paying my veiled form of rent, oops I mean "owning" my home.

Many people with questionable credit (predominantly young adults) bought into the ARM concept by "predatory" lenders hook, line and sinker. The prevailing conditions were that the buyers in question would enjoy low mortgage payments for a period of 3 to 5 years while they rebuilt their credit rating, beefed up their savings and demonstrated more financial restraint and fiscal responsibility. Upon doing so, refinance their mortgage loans by the end of the 3-5 year period for a fixed rate mortgage at a more managable monthly payment. This was the general disclaimer afforded them by these lenders. Unfortunately, many of these home buyers did not follow through with this plan. Mainly because they were basking in the moment of low mortgage payments and spending (rather than saving or paying off credit cards) the residual dollars on major purchases for their new homes. Next thing you know... the initial interest term of the mortgage has arrived and their credit rating either has not gotten better, or gotten worse altogether. Consequently, not qualifying for a re-fi on a fixed interest mortgage. This is simply a general assessment and is not intended to group all foreclosure victims in the same bucket. I'm not in the mortgage business but I've spoken to a few mortgage reps recently and they largely agree with this scenario.

Owning is just a different flavor of renting, when you consider that you have a mortgage. Home owners are debt renters.

Renting debt is a great thing to do during times of inflation. It is a terrible thing to do during times of deflation.

But you are born with nothing, and you die with nothing. All you have is your experiences between point A and point B. Might as well enjoy a nice home during the ride. It doesnt matter if you have a bunch of money in your savings account when you are on your death bed.

Great philosophy opinions here...guess everyone has one :-)
But back to home ownership rates...the original story...and where they may be headed. IMO they may not rebound as high as 05, but they will not drop back to historical rates either.

MBS have fundamentaly changed the risk factors w mortgages, mostly for the better. Sure the exoticly traunched versions will reign in for a while, but the basics of securitizing mortgages to distibute and reduce risk are SOLID! This means mortgages longterm will be cheaper and easier to obtain than in the 60's.

Cheaper easier mortgages means higher home ownership. I know that is not the only variable in the equation, but my gut tells me that most others lead to the conclusion of higher pct hm-ownership too. More population...increasing conservation and zoning and and...lead to further reduction in supply vs demand.

Sure, the demo trends toward SW bode better for the ever scarcer buildable lots there than in the rust belt...but I always said a 1M home makes sense in SoCal, but not in freeze your butt off Land. People can live where they want. Our ancestors crossed oceans in big canoes...and it gets lost on modern victims of inertia that we have planes and electronics today that make a move to where the sun shines an imperative only resisted by those in our midst who are Luddite in nature...or possibly just happily masochistic in Buffalo...:-)