For over a decade, the national home ownership rate has been declining.
The home ownership rate peaked at 69.2 percent in 2004. But for the past 10 years, the rate continues to fall and stands at less than 63 percent today, the lowest in half a century. Some industry analysts are predicting further declines too, with a home ownership rate that may drop below 60 percent.
Read more: Help Clients Get Smarter About Ownership
In new Insight posted at Freddie Mac’s website, however, the mortgage giant says such doom-and-gloom projections ignore potential macroeconomic influences that likely will have a significant impact on the future of the home ownership rate.
For instance, the future of housing finance has yet to be sorted out, Freddie Mac notes. The GSE’s are in their eighth year of conservatorship. “No one knows when a consensus on the complex issues surrounding housing finance will be reached in Congress, but whatever choices are made will surely influence the future path of home ownership,” the report notes.
Also, millennials may still play catch up. They may finally marry, raise families, and buy homes at a faster pace than previous generations. Sean Becketti, Freddie Mac’s chief economist, says projections that home ownership rates will drop further fail to take into account that today’s millennial 35-year-olds may not act exactly like today’s baby boomer 55-year-olds.
Further, factors impeding the lower home ownership rates of non-white demographic groups may be overcome, according to Freddie Mac’s report.
Becketti says other studies predicting a drop in the home ownership rate are failing to take into account such “future macroeconomic disruptions, significant policy changes, or shifts in social attitudes in their calculations.”
“In either case, we believe their projections may be overly pessimistic,” Becketti says. “The income and education gaps that are responsible for some of the differences may be narrowed or eliminated as the U.S. becomes a ‘majority minority’ country. And as these types of potential home buyers comprise a larger and larger share of the population, it will become increasingly expensive to overlook them. Profit-oriented financial institutions will be motivated to find better ways to serve them.”
Source: “Why Are the Experts Pessimistic About the Future of Homeownership?” Freddie Mac (Oct. 12, 2016)