National Association of Realtors tackle low homeownership

Despite steadily improving job markets and historically low mortgage rates, the U.S. homeownership rate is stuck near a 50-year low because of a perverse mix of challenges, according to findings of a new white paper titled, “Hurdles to Homeownership: Understanding the Barriers.” The study was released in recognition of National Homeownership Month at the National Association of Realtors Sustainable Homeownership Conference held at UC Berkeley this month.

Led by a group of housing experts, including NAR president, William E. Brown, NAR chief economist Lawrence Yun, and Berkeley Hass Real Estate Group chair Ken Rosen, the conference addressed the dip in homeownership and its impact on the economy.

“The decline and stagnation in the homeownership rate is a trend that’s pointing in the wrong direction, and must be reversed given the many benefits of homeownership to individuals, communities and the nation’s economy,” said Brown.

The research, which was commissioned by NAR and prepared by Rosen Consulting Group (RCG), identifies five main barriers that have prevented a significant number of households from purchasing a home: post-foreclosure stress disorder, mortgage availability, student loan debt, single-family housing affordability, and single-family housing supply shortages.

The study found the Great Recession has created negative biases about owning, particularly long-lasting psychological changes in financial decision-making and housing tenure choice for homeowners who experienced foreclosure, people who lost their jobs, and some young adults who witnessed the hardships of family and friends. Borrowers with good-to-excellent credit scores are not getting approved in a timely fashion due to overly tight lending standards. Student loan debt is making it extremely difficult for young households to save for a down payment, qualify for a mortgage and afford a mortgage payment.

Single-family home construction plummeted after the recession and is still failing to keep up with demand. Fewer property lots at higher prices, difficulty finding skilled labor and higher construction costs are among the reasons why housing starts are not ramping up to meet the growing demand for new supply.

“The insufficient level of homebuilding has created a cumulative deficit of nearly 3.7 million new homes over the last eight years,” according to Rosen.

“Low mortgage rates and a healthy job market for college-educated adults should have translated to more home sales and upward movement in the homeownership rate in recent years,” said Yun. “Sadly, this has not been the case. Obtaining a mortgage has been tough for those with good credit. Savings for a down payment are instead going towards steeper rents and student loans. First-time buyers are finding that listings in their price range are severely inadequate.”

Unless these challenges are addressed, RCG forecasts affordability will fall by an average of nearly 9 percent across all 75 major markets between 2016 and 2019, with approximately five million fewer households able to afford the local median-priced home by 2019.

“The U.S. cannot become a nation of renters,” said Denise Welsh, president of the Silicon Valley Association of Realtors. “Historically, lawmakers have understood the value of homeownership in fostering communities, creating social stability, and building wealth over the long term. Not only are the challenges mentioned reducing a pool of potential buyers, but they are the reason why despite strong job growth we continue to see subpar growth in our economy.”