Why are the Experts Pessimistic About the Future of Homeownership?

The national homeownership rate has been declining for over a decade. According to the experts, we can expect further declines.

The homeownership rate peaked at 69.2 percent in the last half of 2004, in the middle of the housing boom. The rate fell 1.4 percentage points during the last gasp of the boom, just prior to the onset of the Great Recession. During the recession, the foreclosure crisis reduced the homeownership rate a further 3.1 percentage points. And in the seven years since the end of the Great Recession, instead of bouncing back, the homeownership rate has dropped an additional 4.5 percentage points to less than 63 percent today, the lowest rate in half a century.

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This decline in the homeownership rate has triggered debate among housing experts, especially among those who view broad access to homeownership as a signature achievement of American economic policy. Of particular concern is the pronounced drop in the homeownership rate in demographic groups that historically have had lower-than-average homeownership rates. For instance, the homeownership rate among African Americans spiked briefly during the housing boom, rising from a low of 41.2 percent in Q3 1995 to a high of 49.7 percent in Q2 2004. Since then, African Americans have given back virtually all those gains; their homeownership rate has fallen eight percentage points to 41.7 percent, the lowest rate among the racial/ethnic groups tracked by the Census Bureau.

If the experts are right, the homeownership rate will decline even further in future decades. Homeownership rates below 60 percent are not out of the question according to these projections. How likely are these projections to come to fruition? What factors lead the experts to this conclusion? And, just as important, who will own a home? Will historically underserved groups recover the ground lost during the last decade, or are they likely to be stuck indefinitely at substantially lower rates of homeownership than the population as a whole?

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