In These New Times

Foreclosure-fueled decline in home ownership rate may be lasting trend
Number of renters may rise to levels last seen in 1970s or ’80s

By Dan Voorhis

Chicago Tribune

McClatchy/Tribune news
August 18, 2009

Home ownership is on the decline nationally after rising to record levels in 2005, as the epidemic of foreclosures continues.

The rate of home ownership peaked at 69 percent and fell to 67.4 percent in the second quarter of this year. That may seem a slight difference, but every percentage point equals roughly 1 million people.

Those who lose their homes through foreclosure often become renters, although many will move in with friends or relatives.

Some experts say the trend isn’t temporary. The collapse of the housing bubble and the disappearance of easy credit coincides with demographic changes that will drive down the rate of home ownership, and drive up the number of renters, to levels last seen in the 1970s or ’80s.

Long term, they say, landlords will be the beneficiaries as home-ownership rates return to the levels of 20 and 30 years ago.

In a study, University of Utah professor Arthur Nelson estimated that home ownership will decline over the next two decades to perhaps 64 percent, about where it was in 1990, or lower, but not below 60 percent.

Nelson said people over 75 tend to rent more often than buy when they move. That is the age group growing fastest, doubling in size over the next 20 years, he said.

He also cited what he considered a more or less permanent return to tougher lending standards, such as a 20 percent down payment.

Jim Randel, author of “The Skinny on the Housing Crisis,” agrees on the long-term direction.

“There seems to be a natural limit of about two-thirds home ownership,” he said. “Anything above that starts to get frothy.”

But what appears to be a natural limit can change, Randel said. The 65 percent homeowner rate was about average between 1965 and 1995, but before that it was lower.

What changed in this decade, he said, is the psychology, as well as lending practices. Home buyers in many places came to see houses as a way to make money, he said.

But that psychology has been permanently changed, he said, with the bubble’s collapse, and people are returning to more a traditional view of housing as shelter.

The economic effects will be smaller real estate and construction industries than in recent years, Randel said. It also may benefit the economy by making the work force more mobile to follow jobs.

“Wouldn’t a lot of people in Flint like to just pull up and leave but can’t because they own a house?” he said of the Michigan city with among the highest U.S. jobless rate.

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