“Before the recession, it was a government goal, promoted by presidents of both parties, to get the ownership rate up. Homeowners were thought to care more, and thus maintain their homes better. They could profit from rising home prices, helping poorer people who bought homes improve their economic status…
…Changes in lending practices made it much easier for people to qualify for home loans, and soaring home prices made those who still rented appear to have passed up easy profits…..”, Floyd Norris, “More Americans are Preferring the Lease to the Mortgage”, New York Times
More Americans Are Preferring the Lease to the Mortgage
OCT. 31, 2014
Off the Charts
By FLOYD NORRIS
THE homeownership rate in the United States plunged during the Great Recession. Many families lost their homes as prices collapsed and unemployment rose.
Now the economy is growing, and there are more jobs than ever. Home prices have risen, although they have not fully recovered.
But the homeownership rate continues to decline.
The Census Bureau reported this week that the rate fell to 64.3 percent in the third quarter, the lowest level since 1994. Since the second quarter of 2004, when the rate peaked at 69.4 percent, the number of homes owned by the people who live in them is virtually unchanged, but the number occupied by renters has risen by nearly 25 percent.
Just why that is — and whether it is a bad thing — is subject to debate.
Before the recession, it was a government goal, promoted by presidents of both parties, to get the ownership rate up. Homeowners were thought to care more, and thus maintain their homes better. They could profit from rising home prices, helping poorer people who bought homes improve their economic status. Changes in lending practices made it much easier for people to qualify for home loans, and soaring home prices made those who still rented appear to have passed up easy profits.
Renting, Not Owning
The homeownership rate — the percentage of homes and apartments that are owned by the occupant rather than rented — has dropped to its lowest level in 20 years. As more families rent, the number of apartments being built has recovered to prerecession levels, while single-family housing starts remain depressed.
Source: Census Bureau via Haver Analytics
After the collapse, renting was necessary for many people who had lost their homes. Some of them lacked the money to cover the down payments that were again required for mortgages, or their credit was damaged enough that they were unlikely to qualify for a mortgage even if they could otherwise afford the cost.
There are still worries that homes are expensive, and loans may be difficult to obtain, but there seem to be other reasons people are not lining up to buy.
One is that the recession provided a reminder that jobs can be lost and homeownership can make it difficult to relocate. Some unemployed people could not sell their homes to move to more promising areas. And, of course, it was renters, not buyers, who looked wise after home prices collapsed.
Whatever the reason — whether many people cannot afford to buy or whether a lot of them now fear the consequences of buying — the result has been a liftoff in rentals. And that has caused builders to put far more effort into apartment buildings than they had in recent years.
Of course, some apartments are sold as co-ops and condominiums, particularly in big cities, and some single-family homes are rented. But few builders build single-family houses hoping to rent them, while many multifamily properties are constructed with rentals in mind.
The accompanying charts show the trend in the homeownership rate since 1980, and the trends in a variety of housing measures since the homeownership rate peaked in 2004. Vacancies leapt in the recession, and while they have declined since 2009, the proportion of vacant units is still higher than it was before the recession began. That fact could be helping discourage single-family housing starts, which remain far below prerecession levels, even though multifamily starts have fully recovered.
In early 2006, less than 17 percent of new residences constructed were in multifamily buildings. Over the most recent 12 months, the proportion is more than twice that.A version of this article appears in print on November 1, 2014, on page B3 of the New York edition with the headline: More Americans Are Preferring the Lease to the Mortgage