Tighter lending standards by banks are disqualifying potential home buyers and preventing them from buying homes, at least according to analysts who point to that reason behind the second-quarter home ownership rate falling to its lowest level since 1998. The home ownership rate stood at 65.9 percent in June, its lowest in 13 years, the U.S. Census Bureau reports.
“Tight underwriting standards and the lack of a down payment are keeping a big chunk of buyers out of the market and other people are being displaced by foreclosures,” Wayne Yamano, director of research at John Burns Real Estate Consulting in Irvine, Calif., told Bloomberg News. He predicts that the home ownership rate may fall to about 62 percent by 2015.
The home ownership rate reached a record high of 69.2 percent in the second and fourth quarters of 2004.
“A home ownership rate of 69 percent is not sustainable,” William Wheaton, an economist and co-founder of the Center for Real Estate at the Massachusetts Institute of Technology, told the Investor’s Business Daily. “The notion that it comes down to 64 percent or 63 percent is completely logical, reasonable and likely to happen. … You have a generation of first-time buyers that went overboard into the market in 2000-2007. You’re going to have to wait for the next generation to come in and gobble up houses (and) that’s going to mean a little scarcity of first-time buyers for the next 5 to 10 years.”
But many economists are banking that the younger generation, particularly Generation Y, will drive the housing market in the next decade.
“It may take them a little longer to get a home” due to weak hiring and pay, says Stan Ross, chairman of the University of Southern California’s Lusk Center for Real Estate. But, “I really believe that the American dream [of home ownership] still exists.”
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