A new report by Harvard University’s Joint Center for Housing Studies paints a bleak picture of homeownership in America. The report, titled The State of the Nation’s Housing, details the continuation of a homeownership decline it describes as “unprecedented in American history.”
Since a peak of 69 percent in 2004, the proportion of American households that are homeowners has dropped more than 5 percent. With the slide spurred on by the 2008 housing crash and Great Recession, homeownership has never recovered—in 2015, less of the American population owned their own home than at any point in the last thirty years.
The report also notes that the homeownership gap between white and black households has widened since the recession. The economic dip overall had a disproportionate effect on minority households, with a large part of that impact coming from reduced home equity.
Racist lender practices exacerbated the issue. In 2000, the Treasury Department found that black households in wealthier neighborhoods were twice as likely to be issued expensive subprime loans as were white households in poorer neighborhoods.
Reasons for the Drop
This decline in homeownership is not due to any lack of interest in owning a home—the report notes that 78% of Americans still think owning a home is a “great investment.” Rather, it is a reflection of the barriers that potential homeowners face.
The first big problem facing many first-time homebuyers is one that their parents may not have dealt with, or at least not in the same way. As of 2013, student loan debt affected one out of every five American households. That’s up from around one in ten households in 2001.
The problem has not only spread, but deepened. Average student loan debt per indebted household has gone from $10,500 to $17,000 in that period, and over a third of borrowers owe more than $25,000. This has made it increasingly difficult for potential buyers in their twenties and thirties to save enough for a down payment.
A second problem is the number of homeowners being removed from the pool each year. Foreclosures and foreclosure-related sales have dropped from their eye-popping numbers a few years ago, but they remain significantly higher than in the early 2000s. 2015 saw over 55,000 foreclosures and related sales per month, versus less than 20,000 per month a decade ago.
The report attributes this to “overhang” from the recession and notes that the number does continue to trend downward, albeit at a frustratingly slow pace.
Finally, the report indicates that tightening credit score requirements are keeping a large number of low- and moderate-income Americans from receiving mortgages. That group’s share of total first-time mortgages dropped precipitously between 2010 and 2014, as credit requirements became more stringent at most major lenders.
This trend also disproportionately limits homeownership for minority households, who on average have lower credit scores than their white peers.
The one bright spot? The report notes that for households who were able to buy a home between 1999 and 2009 and then hold on to it through the recession, net wealth grew by over $85,000.
And District residents can feel better knowing that their government is taking steps to address two of these issues, with its work on down payment assistance as well as homebuyer counseling to help raise credit scores.