Homeownership on Path to Sustainability

Posted by Joel pate in Uncategorized. Tagged:

As most housing metrics turned around last year, one vital statistic stayed down: the homeownership rate.  However, one analyst at Fannie Mae says that low homeownership — when put in context with other data — might indicate a promising trend in sustainability.

According to recently published data from the Census Bureau’s American Community Survey (ACS), the homeownership rate was down in 2012 for the fifth consecutive year, falling to 63.9 percent — the lowest rate recorded since the survey was fully implemented in 2005 and lower than any rate recorded in any decennial census since 1970.

“By most measures, 2012 was a year of housing market recovery, with gains in housing construction, home sales, home prices, and mortgage originations.  However, the homeownership rate did not follow suit,” said Patrick Simmons, director of strategic planning for Fannie Mae’s Economic and Strategic Research Group.

At the same time, the ACS recorded significant improvements in housing affordability for all groups, including renters.  According to the survey’s results, the proportion of households spending at least 30 percent of gross income for housing (the threshold before the situation is considered a “housing cost burden”) declined nearly 2 percentage points, bringing it to pre-recession levels.

“The improvement for renters is particularly notable, as it broke a string of four consecutive years of declining affordability,” Simmons said.  “Also of note was a huge improvement in affordability among young homeowners, as evidenced by a drop of 10 percentage points in the rate of affordability problems among 25-to-34-year-old owners during the last five years.”

According to the 2012 ACS, the 25-to-34-year-old bracket was also the group to see the biggest decline in homeownership, with its rate falling 1.9 percentage points.  Since 2007, the homeownership rate for that group has dropped 8.5 percentage points.

Together, the data indicate that the swing from owning to renting that started in the recession hasn’t come back the other way yet.  However, with housing costs waning and loan qualification standards still tight, Simmons expects homeownership to recover to a rate that can actually hold up.

“Tightening of mortgage qualification criteria soon after the onset of the housing downturn probably contributed to the particularly large declines in homeownership rates among young households, but may have also helped to create a cohort of young homeowners who have housing costs that are much better aligned with incomes,” he said

Housing Market Running at 85% of Normal, Pre-Recession Activity

A new index from First American and the National Association of Home Builders (NAHB) suggests that about one in seven housing markets have returned to or surpassed their pre-recessionary levels of activity.

The new Leading Market Index (LMI), released for the first time last week, measures employment growth data from the Bureau of Labor Statistics, home price appreciation data from Freddie Mac, and single-family housing permit growth from the Census Bureau to measure overall improvements in each market.

While the LMI helps illustrate how far the recovery has come in the last several years, NAHB chairman Rick Judson said it also measures “how much further it has to go as we continue to face some significant headwinds in terms of credit availability, rising costs for lots and labor, and uncertainties regarding Washington policymaking.”

According to the association, the index registered a score of 0.85 nationwide, indicating that the national housing market is running at 85 percent of normal activity.

Of the nearly 350 metro markets examined, 52 have reported levels of activity at least equal to those before the recession hit.  What’s more, housing markets in 118 metros scored 0.9 or higher, which Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., described as “a very encouraging sign of things to come.”

Baton Rouge, Louisiana, ranked highest on the list of improved major markets, posting an index score of 1.41-41 percent better than its last normal market level.  Other major metros reporting growth include Honolulu, Hawaii; Oklahoma City, Oklahoma; Harrisburg, Pennsylvania; and Austin and Houston, Texas.

Widening the scope to include smaller metros, both Odessa and Midland, Texas, scored 2.0 or better, meaning their markets have doubled in strength compared to pre-recession years.  Also topping the list of smaller metros are Casper, Wyoming; Bismarck, North Dakota; and Florence, Alabama.

“Smaller metros are leading the way to a housing recovery, accounting for 43 of the top 50 markets on the current LMI,” said NAHB chief economist David Crowe.  “This is very much in keeping with the results of our previous index for improving markets, and is an indication of the extent to which local economic conditions dictate the strength of individual housing markets.”

 

By: Tory Barringer, www.dsnews.com

 

 

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