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There is an ongoing concern for the national homeownership rate. It’s way down to only 63.5%. That’s a huge drop of 5.6% from the peak (pre-2008) of 69.1%. (I hope you get my sarcasm).
Is the fact that more than 60% of Americans now own their home so terrible? Given what happened when the homeownership rates crept up close to 70%, I don’t think so. Let’s face it, although everyone should have the opportunity to own a home, not everyone should actually own a home.
There were a number of reasons that led to the collapse of 2008. Not all of it had to do with eased credit and programs introduced to increase homeownership, but much of it did. Ratios and LTVs were stretched to the limits, along with the easing of credit standards which qualified some people for homes that maybe weren’t quite ready.
So, now that things appear to be recovering, here we go again. There is now a cry to increase homeownership, especially among minorities and those families in the low to moderate income range. They say there is a need for more programs to help enable more Americans to purchase and own a home (Homeownership). I think that’s great, but let’s be careful.
There are plenty of lending programs out there to assist potential homebuyers in getting the financing they need. In connection with any of these programs, first-time homebuyers should be required to go through pre-homeownership counseling; face to face, not online. The key is more than just qualifying for a loan but in having the income, assets, and knowledge to maintain the home after purchase.
That’s where the “more” comes in. The lending industry, no matter how creative, cannot do it alone. To increase homeownership AND maintain that home at a high level, the economy must cooperate. People need to have stable employment paying sufficient wages to allow payment on the mortgage debt and a decent lifestyle, with the ability to save a little for a rainy day. That’s not the case today.
Too many first time homebuyers get a home by the “skin of their teeth”. They walk away from the closing table with nothing left. Think about it. The least experienced, buying the oldest housing stock, in need of the most repairs, with little equity. One hiccup, one emergency, a broken heater, a roof leak, and they’re done. The expense puts them in a hole from which they can never dig out. No matter how hard they try. It’s no wonder they walk away.
I applaud the intentions, but I also caution the process. Let’s make sure the programs are a right fit for the buyers, and the process is one that ensures more than just qualification for the loan but also the ability to maintain the home and the payments.
Increasing homeownership is a noble cause but there is a limit. When we exceed the limit, everyone gets hurt. We saw what happened. Let’s be a little more careful this time around.
You know what they say about “good intentions”…
