Housing recovery: Good for would-be homeowners?

Rows of homes stand at a housing development on March 6, 2013 in Mesa, Ariz.

The Federal Reserve's bond and mortgage purchases have kept long-term interest rates low, but they haven't done what the Fed intended -- which was to help would-be home buyers get affordable mortgages.

Instead, they've fueled a new round of speculation by investors and real estate developers. And that's meant a new generation of Americans has become renters rather than owners.
Yes, home sales and prices have been rising, which in turn has created lot of construction jobs and made some home-owners feel a bit wealthier. All good for the economy, at least for now.

But the housing market hasn't turned around because banks are issuing lots of new mortgages. Lending standards are still tight, and banks are reluctant to lend -- especially to younger. Unemployment remains high among millennials -- more than 8 percent even for recent college graduates. And their student debts keep mounting. As a result, the number of first-time home buyers is still shrinking, and young buyers now make up their smallest share of the housing market in more than a decade.

The rise in home prices and construction is being fueled instead by big investors -- many of whom are paying cash and have no intention of living in the homes they buy or build. They're getting a high return on investment by borrowing at rock-bottom rates and then turning the properties into rental units, which young individuals and families are moving into in record numbers.

Last month, a Pew Research Center survey found that the share of millennials who own their homes has fallen from 40 percent to 34 percent since the start of the recession, with a similar decline in residential debt.

Overall, the percent of Americans owning their homes continues to drop, while the percent renting is growing.

The housing market may be bouncing back, but not homeownership. And that's a big change for an economy and society once based on the ideal of owning your own place.

About the author

Robert Reich is chancellor's professor of public policy at the University of California, Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.
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Since when home ownership became such a goal? The american public is brainwashed and has been since the banks invented securitization of the loans. The vast majority of prospective home owners do not even consider the economic case for home ownership - the rent vs. buy decision. It is not unusual to be better off with renting, yet nobody talks about educating the public so people could make rational educated decisions. This is part of the reason why we got in trouble in the first place.

The two things that Congress has done, in the name of helping home ownership, has really only helped the big banks/players. The mortgage interest deduction has only caused housing prices to go up, which results in paying the banks more interest. Keeping interest rates low has only helped those with money in their pockets buy expensive property.
The only way that legislature can actually encourage home ownership would be to have a progressive property tax. Instead of being based on property values, property taxes should be based on the percentage of land that somebody owns in the county. The more land you own, the greater portion of the property taxes you pay. This would discourage somebody from becoming too big, and would also encourage many small players in the market.
Sadly this will never happen because if only one county/state does it, all business will flee to states where they can get special treatment.

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