HOUSING SALES AND HOME OWNERSHIP RATES.
ONE ITEM OF CONVERSATION YOU DON'T HEAR VERY MUCH IS THE EFFECT OF THE HOME OWNERSHIP RATE AND ITS POWER AS THE MARKET WENT UP NOR DO YOU HEAR MUCH ABOUT WHAT THE EFFECTS MIGHT BE AS IT DECLINES IN THE RECESSION AND HOME SALES DECLINE ALONG WITH PRICE. THE GRAPH BELOW SHOWS THE RATE WE AS NATION HAVE OWNED HOMES SINCE 1965. STARTING THERE AT JUST BELOW 63% OWNERSHIP AND 37% RENTERS. IN THAT TIME PERIOD YOU ACTUALLY WERE SCRUTINIZED PRETTY HARD ABOUT YOUR QUALIFICATIONS TO OBTAIN FINANCING AND ACTUALLY HAD TO HAVE A DOWN PAYMENT.
FAST FORWARD TO THE 2005 YEAR PERIOD AND HOME OWNERSHIP RATES EXCEEDED 69% AND THE RENTER PORTION OF THE POPULATION DECLINED TO LESS THAN 31%.
THE SECURITIZED MORTGAGES COLLAPSED BECAUSE OF LAX UNDERWRITING STANDS AFTER THAT PEAK, ONE THING THAT HAS DEFINITELY CHANGED, SINCE THE PEAK, IS THE FINANCING OF PURCHASING A HOUSE. YOU WILL NEED A DOWN PAYMENT AND YOU WILL HAVE YOUR INCOME VERIFIED AND YOUR CREDIT SCORE WILL NEED TO MEET A MORE STRINGENT STANDARD.
THE QUESTION THEN BECOMES WITH NEW LENDING STANDARDS AND A RECESSION HOW MIGHT THAT AFFECT A HOUSING RECOVERY.
THE FIRST THOUGHT IS THAT IF HOME OWNERSHIP RATES DROP BACK TO A 64% OWNERSHIP AND 36% RENTER POPULATION EITHER SALES, PRICE OR LENDING HAVE TO GIVE UP SOMETHING. AT THIS POINT IT APPEARS SOME OF THE EXCESS INVENTORY IS BEING PURCHASED BY FIRST TIME BUYERS USING THE $8,000 FIRST TIME BUYER CREDIT PLUS HISTORICALLY LOW INTEREST RATES AND INVESTORS.
FIRST TIME BUYERS ARE LIMITED BY THE INCOME STREAM IN THERE LIFE AND THE POPULATION QHORT OF THE EXISTING POOL.
INVESTORS ARE MOTIVATED BY PROFIT OF COURSE AND AT THIS STAGE SEEM TO BELIEVE THE GREATER FOOL WILL APPEAR AND GIVE THEM OUT SIZED RETURNS AS HOME OWNERS POUR BACK INTO THE MARKET AND FORCE PRICES UP. YET WHAT HAPPENS TO OVERALL PRICE MOVEMENT AT THE SAME TIME THE ECONOMY RECOVERS YOU HAVE REMOVED 5% OF THE BUYING PUBLIC AND MADE THEM RENTERS.
AS WITH ANY DEMAND DRIVEN PRICE MOVEMENT THIS MUST HAVE AN EFFECT ON THE OVERALL PRICE MOVEMENT OF HOMES.
ON THE POSITIVE SIDE FOR INVESTORS IT WILL CREATE MORE DEMAND FOR RENTALS THOUGH THE PROFIT IN SINGLE FAMILY RENTALS IS APPRECIATION NOT THE MONTHLY RENT COLLECTED.
IT WILL BE INTERESTING TO SEE HOW IT PLAYS OUT OVER THE NEST 2 TO 5 YEARS.
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