A recent study conducted by two professors concluded that the recent drop in the homeownership rate brought the rate down closer to historical averages and that we could see a further drop in the near future. Stuart Gabriel of UCLA and Stuart Rosenthal of Syracuse University studied the homeownership rate over the past decade – which fell from an all-time high of 69.2 percent in 2004 to 66.4 percent in the first quarter (Q1) of 2011, according to the Mortgage Bankers Association (MBA) – and pointed to a number of factors that influenced the levels of homeownership. “The question of why homeownership rates are falling now is really a question of why they were so high during the middle of the last decade,” Gabriel said in a statement. According to the study, increased borrower access to mortgage loans and less risk-averse attitudes from prospective and current homeowners led to a higher homeownership rate in the middle of the last decade. However, these trends have reversed and thus the homeownership rate is now closer to historical averages. What should consumers expect in the near future? Rosenthal said the answer depends largely on attitudes about homeownership, the state of credit market and overall economic conditions. If attitudes and conditions return to patterns seen in 2000, he said, the homeownership rate may have bottomed out. “If, instead, household employment, earnings and other socioeconomic characteristics over the next few years remain similar to those in 2009, then homeownership rates could fall by up to another 1 to 2 percentage points beyond 2011,” Rosenthal said. Rosenthal also said that if we are to experience a further decline, that decreases would likely be most pronounced in regions in which house prices were most volatile in the last decade.
