The Dream Lives On: The Future of Homeownership in America
W13-1: With house prices falling nationally by more than 30 percent from 2006 to 2011 and foreclosures soaring, many have started to write the obituary on homeownership in America. They argue that people, especially young adults, have watched the carnage and decided homeownership is not for them. Yet there are clear signals already that the dream of homeownership remains very much alive. Attitudinal surveys recently conducted by a range of different organizations show strong and continued interest in homeownership, even among young adults.
History suggests that market conditions have a powerful influence on homeownership rates by age, race, and household type. That a major collapse in home prices, high unemployment, record foreclosures, and a tightening of mortgage credit would produce a slide in homeownership rates should not be surprising. Economic theory supports this view—the choice to own or rent at any point in time should be influenced by people’s expectations about the future of home prices, rents, and returns on potential other investments. In addition, changes in underwriting standards matter because credit constraints can thwart people’s ability to act on their interest in owning.
The question is whether recent house price declines and the contraction of mortgage credit will produce a profound and lasting change in Americans’ desire or ability to own homes.