The “real” homeownership rate, which we define to be the percentage of households who own a home and are not 90 days or more delinquent on their mortgage, has fallen to 62.1%, which is the lowest level in almost 50 years.
The 65.5% homeownership rate published by the U.S. Census Bureau greatly overstates the real level of homeownership in the country, as the Census Bureau counts all 3.8 million homeowners who are 90+ days delinquent on their mortgage as homeowners. Despite herculean efforts by the Administration to save homeownership for these people, most of them are really just renters in waiting.
Historically, the spread between the published and real homeownership rates has been slightly below 1.0 percentage point, even in a strong economic environment there is always some level of delinquency. The spread has widened for many reasons, including:
- The tremendous economic downturn that caused significant financial pain to many borrowers
- Understaffing at the banks, who cannot deal with the huge inventory of delinquent mortgages and the complications of loan modification or foreclosure with so many parties involved
- Banker fear of fees, sanctions and even jail time (in Nevada) for not properly documenting the foreclosure process
- Dealing with many Federal government attempts to intervene in the process, requiring documentation of modification attempts such as HAMP or HARP
- Clever borrowers, who have figured out how to live for free for months and even years
We are confident homeownership will come back. Our survey of 20,000 consumers, and many surveys by others, confirms that the American dream of homeownership is as strong as ever. Additionally, in states where the foreclosure process has moved more smoothly than others (such as Arizona and Texas), we are seeing foreclosed homeowners return as home buyers after the 3-year waiting period required by most mortgage programs.
In summary, let’s stop pretending that 65.5% of Americans own their home, recognize that the real number is 62.1%, and move forward with responsible mortgage programs that allow responsible Americans to achieve the American dream. That dream needs to start with households cleaning up their credit, paying down their debts, saving a down payment, and taking advantage of the lowest mortgage rates in history to buy the home of their dreams.
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