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According to a recent Trulia Report, “Where Have All the Homeowners Gone?”, in 90 of the largest 100 metro areas, homeownership rates fell from the levels from 2000 to the levels from 2016. Why?
According to Felipe Chacon, Trulia’s Economist and the chief author of the report, neighborhoods that swung to renters from owners or vice versa were influenced by three factors:
- Changes in household income
- The type of new construction, or lack of it, in the area
- The housing crisis which ultimately displaced huge swaths of the population.
Some people who lost their homes in the 2008 crash are still a little leery of buying a new home or are not quite financially ready and/or creditworthy to do so.
However, are the homeownership levels of today more indicative of what should be the homeownership rate? Put another way, were homeownership rates in 2005, 06 & 07 artificially inflated by the myriad of easy credit programs available for home financing?
Did consumers get homes that they couldn’t afford? The crash indicates that maybe they did.
In our quest to once again increase the homeownership and profit levels, we need to be very careful to not repeat the sins of the past.
Everyone deserves their fair shot at the American Dream. Everything needs to be done and should be done to provide them with that opportunity. But, that should not create a detrimental situation to them or to the economy because it might negatively affect housing.
Homeownership rates should grow because more people want to own a home and they are qualified to afford AND maintain the home they purchase.
Otherwise, to put consumers into homes they can’t afford is a recipe for disaster. Been there; done that, and don’t wish to go there again.
With the economy looking up, the potential for job and wage growth on the horizon, and the recent tax cuts, people are interested once again, or for the first time, in owning a home. This is great news as long as these potential homeowners are carefully qualified.
Lenders have a responsibility to ensure that today’s buyers have the financial wherewithal and education needed for successful homeownership. Let’s not let consumer’s irrational exuberance, or the quest for more business, cloud our judgment.
Unfortunately, not everyone is qualified to own a home. The hard part is saying no to those who are not.
However, we can provide them the service of education and information to help them prepare to achieve their goal.
Those who we educate can be the successful homeowners of tomorrow, not the unfortunate byproducts of another catastrophe. Loan quality and compliance count in any market, whether homeownership rates are up or down.
Let’s not lose sight of what’s really important.
