Homeownership Rate: Cliff Diving
Submitted by
CalculatedRisk on Tue, 01/29/2008 - 7:42am (35 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 16 members and 152 guests online.
Recent Recommendations
Sorry for OT - watch out fellow bloggers - they are suing "us" for bringing down the market...
Opera Tower, LLC & Tibor Hollo Sues Me for $25M » Miami Condos, real estate, Miami Condos Blog,Foreclosures, South Beach
Much was made about "innovative" mortgage products pushing homeownership rates above 69% (up from the 64-65% we had for decades).
I always wondered if we weren't just pulling future demand into the present by effectively saying, "No need to save up a down payment and no need to earn enough to prove you can afford this mortgage!"
Looks like that might be right, which doesn't bode well for a housing recovery any time soon at all.
Tousa, Florida Homebuilder, Files for Bankruptcy!
Dominos anybody?
Tousa, Florida Homebuilder, Files for Bankruptcy (Update7) - Bloomberg.com
So much for the ownership society - easy come, easy go.
(The non-snarky observation is that ridiculous lending standards did nothing make people fundamentally more wealthy, so this decline was inevitable.)
crispy&cole,
Seems to be a cue for "us" to flip-flop our stance into that of O-Joe and Seb.
I'll bet you that the dive Treasury yields took last week is a long-term cyclical bottom, and long-term rates will move powerfully to the upside from here.
Low long-term Treasury yields were driven by rate-cutting expectations and global flight to quality. Neither has legs. Inflation, high oil and weakening economy = dollar weakness and makes long-term Treasuries unattractive.
We may soon see a steep yield curve in the early stages of a recession. Not a good environment for housing. For lots of people, it's refi now or not at all.
President Bush's Initiatives to promote the Ownership Society, from whitehouse.gov
Expanding Homeownership. The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent. Minority homeownership set a new record of 51 percent in the second quarter, up 0.2 percentage point from the first quarter and up 2.1 percentage points from a year ago. President Bush's initiative to dismantle the barriers to homeownership includes:
American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and
Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.
Home ownership declining. I wonder how long it will be until the NAR spins this as evidence of pent up demand and a housing bottom?
Firetruck maker files for bankruptcy, blames IBM
creating a "liquidity crisis" that ultimately forced it to file for bankruptcy court protection
Firetruck maker files for bankruptcy, blames IBM
| Reuters
Fed Acution closed just between 3.0 and 3.25 .... at 3.13.
Neal "President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families" - I think he is out of step as families are now viewing ownership as a business decision (CR was the first that I can tell that spotted this trend...Walk away with pride!)
The why ownership is disappearing is because everyone doesn't use diversification
Lively Money: Why money should be in same place ;The art of diversification!!!
and put all their money into one house.
b ownership plot is zero-suppressed...
You Walk Away - Foreclosure Protection Plan and Kit, Mortgage Loan Modification, Foreclosure Assistance, Debt Consolidation, Credit Repair from Foreclosures
You Walk Away The Personalized Plan
How we help you:
Several years ago, when state attorneys general approved a nationwide settlement with Household International over subprime lending, the AGs said they didn't want to put subprime lenders out of business, because that would make it harder for lower-income people to borrow money. In retrospect, maybe that was exactly what they needed to do.
A simple fact gets lost in the babble over "the dream of home ownership." A lot of abusive lending is refi, not young couples buying their first homes. When those refis go bad, the reality of homeownership becomes the nightmare of foreclosure and bankruptcy.
OT - Has anyone discovered anything about the details of the senate proposal for the stimulus package. I read in the paper this AM about some provision to allow recent losses to be applied against taxes paid for up to 5 years back. That could be a huge win for the HBs, if they get tax refunds or credits going forward. Is this why they are running?
"You Walk Away The Personalized Plan"
And folks were wondering what the unemployed mortgage brokers would do! I guess that guy in Texas was right when he said they were hustlers.
Sure is hard to keep a handle on this disintermediation thing once you let it out of the box.
--
You need to check out the home ownership rates during 1920s and 1930s, UP Big, and DOWN BIGGER, respectively.
On the road to the Greater Depression anyone?
Jas
Considering how few of those people actually OWNED their homes or had any hope of every owning them vs. refinancing or house-hopping every few years, I wonder if there really was a large spike in actual ownerships rates. But, as the Recession unfolds, lots of people - sadly including those who put down payments on the house - will be losing their homes.
What caused the big leg up in the ownership rate starting in 1995-96? Interest rates? Real economic expansion? My memory is that the interest rate cuts didn't start until 2001.
I'm just trying to figure out what a non-bubble baseline rate should be, or if there is such a thing.
CR, Tanta, and everyone else, thanks for the blog and enlightening commentary!
barely,
I am thinking the same thing; the HBs would get big refund checks from the IRS, which is why some of the HBs that had been all but dead - BZH, HOV - are bouncing the most.
The new shareholders of MER and C would probably benefit as well. Great idea! Let's not just buy their oil, let's subsidize their investments here.
ddavis,
I think it was some tax laws. Something about not paying taxe on gains after selling a house. I may be wrong.
ddavis - check out this page for historical Fed rates.
REBear - the $250K/$500K capital gains exemption for primary residences was passed in 1997. You can see the effects of that on prices starting in 1998.
I LOVE the youwalkaway.com site!
The imagery of happy families is priceless! Almost exactly what you'd find at a KB Homes or similar builder site except the quality time with family involves cardboard boxes.
A lot of people do own second homes, usually cheaper vacation homes and sometimes rentals they own while they live somewhere else, sometimes a second small home in a place they travel to often.
How long before the McMansions get dumped on the market or jingle mailed and people just go live in the smaller, cheaper home?
Frederson,
Thanks
Graphing completions against vacacies presents an interesting view of how much more build up in vacancies may occur.
i think guys you should monitor smth that is called "vacant housing units for sale or rent or seasonal" from the same source. this is basically "empty houses". the figure now is 17.77m units. if you look at housing situation from that point of view, housing market hasn't even started curing its problems. as a percentage of total housing units this ratio stands at 14% now, vs lt average of 10%. that means 5mn units are potentially for sale.
that means 5mn units are potentially for sale.
Yeah, but unless they actually come on the market they won't affect prices. Sure, they might be unloaded if TSHTF, but we're not close to that point.
--
chegewara: "think guys you should monitor smth that is called "vacant housing units for sale or rent or seasonal" from the same source. this is basically "empty houses". the figure now is 17.77m units. if you look at housing situation from that point of view, housing market hasn't even started curing its problems. as a percentage of total housing units this ratio stands at 14% now, vs lt average of 10%. that means 5mn units are potentially for sale."
You are assuming that CR can do simple arithmetic, or that he wants to. Unfortunately, I have concluded beyond any doubt that he can't. He has refused to reconcile is "estimate" for demand with the Housing Inventory data, especially, the Vacant Units. This has been my biggest problem with CR. People have a bad habit of not answering questions that would prove that they are wrong.
Economics is all about human behavior! That is why economists are dismal scientists.
Jas
CR, nice graphs, sir.
Jas, quit whining. We've heard your complaint once, twice, ad infinitum.
Hey, do yourself a favor and put up the graphs/analysis that you propose on your site.
Learn the f****ng lesson, man, to quit being a PITA with your host. Geez, did your mother and father not teach you how to be effective?
Also, on your site, please post a list of recommended books to get an alternate view of history.
barely writes:
OT - Has anyone discovered anything about the details of the senate proposal for the stimulus package. I read in the paper this AM about some provision to allow recent losses to be applied against taxes paid for up to 5 years back. That could be a huge win for the HBs, if they get tax refunds or credits going forward. Is this why they are running?
That was one of the things that Bush had on his origional list, but was forced to drop by Polosi (she got a little bit, but not nearly enough). There are prob some GOP hacks in the Senate who want to add it back in.
I think JOhn stark makes a good point. The refinance machine took many stable homeowners who had houses and mortgages they could afford and encouraged them to repeatedly do cash out refi's until they fund themselves way over their heads and losing their houses. The drop won't come just from first time buyers who jumped the gun but from people who had already been homeowners.
How could vacancy rate all of a sudden jump ?
Could someone explain this ?
Thanks