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Jim Morrison

In the second quarter of last year, the Census Bureau reported the rate of U.S. homeownership dipped to 62.9 percent, the lowest level since 1965. That was true and there are lots of reasons for it. Headlines like this one made it seem like the sky was falling at the time, but by the end of the fourth quarter, the homeownership rate rebounded to 63.7 percent.

Those numbers require context to understand.

The highest homeownership rate this country has ever seen was 69.1 percent. That was in the first quarter of 2005, which, as we all know, ended poorly. Many owners had sub-prime, no-documentation-needed loans and ultimately couldn’t pay them back. The foreclosure crisis followed and the effects are still being felt across the country.

Mike Fratantoni, chief economist of the Mortgage Bankers Association told Banker & Tradesman last year that historically, a homeownership rate between 64 percent and 65 percent is considered healthy and sustainable. We’re practically there. He also said the fact that our country’s population is aging points to the fact that we’ll likely get to that sweet spot in the coming decade.

Hispanic homeownership rates are rising and mortgage credit availability is rising (albeit slowly). Many parts of the country still feel the effects of the housing crisis acutely, but each year things get a little better.

And what’s so inherently awful about renting? Renters actually benefit in a declining real estate market because they don’t lose equity and can even see reductions in rent.

Landlords provide a vital service to renters. In exchange for rent, they provide shelter for people, many of whom will go on to become homeowners. Those who choose not to buy a home or simply can’t afford it, can rent forever.

Renting a home is also preferable if you need or want more flexibility. People who move more often for work or other reasons may prefer to rent rather than incur the costs of buying and selling a home each time they have to up stakes and move. Also, many homeowners are renters as well. They rent vacation homes or keep an apartment in a city they may work in for a time, while returning to their home on weekends or after a project is completed.

The economy needs renters and homeowners in the right proportions. It’s in everyone’s best interests to fine-tune that mix so it’s optimal for all, but when we’re within 1 percent of the goal and things are moving in the right direction, headlines ought to reflect that.

Homeownership Rates Aren’t As Bad As You Think

by Jim Morrison time to read: 2 min