The U.S. home ownership rate stands at a 15-year low with the latest
figures showing 65.6 percent of Americans living in owner-occupied
homes. At peak in 2004 the ownership rate was a hair shy of 70
percent. Over the next two years it may fall further, possibly to 64
percent before stabilizing. But the falling homeownership rate will not
mean fewer home sales. The dynamics is such that both the rental and
ownership households will rise, though the proportion will be such that
the home ownership rate will fall.
Ownership over the years (US) |
Though ownership and rental demand at first appear to be a trade-off in
most years, the net number of homeowners and renters also rises
simultaneously in most years. It is a natural outgrowth of about 3
million additional people living in the country each year, which
generally leads to about 1.1 to 1.3 million net new household formations
each year. From the 1960s on, the number of home-owning households
rose on average by about one million each year while the number of
rental households rose by 300,000 to 400,000. In some years, there are
distinct tradeoffs between owning and renting with one rising while the
other falls. The starkest example of this are the years since the
housing bubble crashed. The number of homeowners fell from 2005 to
today while the number of renters rose quite significantly. The key
reason for this prolonged multiyear trade-off development arose because
of a sharp slowdown in household formation. Household formation in the
past 5 years has been only the half the normal rate. It is
understandable, given the difficult economic conditions of the past
several years, for many young adults to move into their parents’ home or
find extra roommates to share the living costs. But a return to normal
household formation will finally mean a rise in the net new numbers of
homeowners and renters, as has been historically the case. In a
more optimistic scenario, if the household formation burst out in order
to compensate for the prolonged suppression, to say something like 1.5
million annually over the next few years, then the increase in net new
homeowners and net new renters could both be higher than their historic
average gains.
This article was forwarded to us be someone in the industry and didnt have a source to quote from. PrivoCorp does not claim ownership of the article and regrets the inability to provide the source. However, it does seem like the article has made reasonable assumptions which are true and can only be an indicator of things to come. One thing is that the article does not provide any information on what the home ownership rates will "stabilize" to. This would be helpful in making some meaningful projections. Either way, this could only be beneficial for a contract mortgage processing company like Privo Corporation!
This article was forwarded to us be someone in the industry and didnt have a source to quote from. PrivoCorp does not claim ownership of the article and regrets the inability to provide the source. However, it does seem like the article has made reasonable assumptions which are true and can only be an indicator of things to come. One thing is that the article does not provide any information on what the home ownership rates will "stabilize" to. This would be helpful in making some meaningful projections. Either way, this could only be beneficial for a contract mortgage processing company like Privo Corporation!
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