A 'natural rate' of homeownership

The homeownership rate, at 65.4 percent, has swooned back to its 1997 levels. The current rate is 3.6 percentage points below the peak reached during bubble years.


In a story for Bloomberg Businessweek, I argue we're coming close to a "natural rate" of homeownership. On one hand, there are powerful demographic forces behind owning.

Homeownership still has its attractions. America is aging, and older folks like the relative security that comes from owning. A home offers roots in a community. Owners also don't have to worry about landlords raising the rent on them. A home becomes more affordable for many aging Americans as their incomes and wealth increase….

On the other hand, the rise in financial and job insecurity fights against owning.

Families have changed in ways that will dampen the desirability of owning. Couples are getting married later. Far more important, the average worker has less job security today. Everyone feels they live on a high-wire act as corporations routinely downsize, right-size, reengineer, and overhaul their operations. And that was before the high unemployment rates of the worst labor market since the Great Depression. Laid-off workers have learned the hard way that they need to have the kind of financial freedom that comes from renting.

Taken altogether, my guess is that the homeownership rate will probably stay around where it is at the moment -- give or take a fraction.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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