I remember when my parents purchased their first home in 1949. Up to that point we lived in government camps and rented shacks. None of those camps or shacks are here any more. It was about 1949 that I ever heard about a VA loan and it sounded like a good deal. I was just a kid, but after serving in the war it seemed like they deserved special treatment compared to those who did not serve. Based on statistics from the Internet at the depth of the depression, home ownership was just above 40% in the USA. Now it is much higher.
The question that we need to investigate is, "What is the natural" level of home ownership for the USA? Realizing that there is "NO Free Lunch", we have to expect that any attempt to push the level of home ownership higher than the "natural" level will only come at a cost. Once we start from this point, we are in a position to ask the next question and that is, "is it worth it?" I don't have any data on this, but I am going to assume that 50% is the "natural" home ownership level. The most recent data that I can find shows that our home ownership rate is 68%. My guess is that 80% of those homes have a mortgage. We hear all this about, "being under water", but this only applies to those who have a mortgage. Does anyone care about those people who have their homes paid off or those who have paid their loans down to a low level? It seems that all the talk is about those who owe more than their home is worth. I can tell you for a fact that many of those under water have second mortgages or home equity loans. This is just the setup for my main point.
We all agree that we have excess inventory in unsold homes so if they were sold, my estimate is that home ownership would now be at least 73%. Now, based on my assumptions, we are really 23% points over the "natural" level of home ownership. Now let me take these numbers one more step. How far do we have to go to get back to the "natural" home ownership level? 23%/73% = 31.5%. My point is that we have to let home ownership drop much more than most people think before we are back to the "natural" level. I think that I am being realistic. This does not even take into account the fact that most of the newer homes are far too big and thus have cost us much more than they should have been. The price decline is only a partial adjustment for this fact. If we roll in the down sizing of homes the impact is a lot more.
Now how did we get into this problem in the first place? Government policy! You know the programs. They read like alphabet soup. These programs did not come for free. We paid to get the home ownership rate up to 68% plus the 5% excess inventory of unsold homes. Have you ever looked around the world to see how home ownership compares to the USA and what kinds of alphabet soup programs that they have? Here are a few numbers. Australia--69%, Canada--67%, Germany--40%, Italy--80%. Notice that Canada does not have the alphabet soup programs that the USA does and yet they have a 67% home ownership rate? Compare that with my natural 50% home ownership rate for the USA? It is is very interesting that Germany, one of the strongest economies in Europe and the world only has a 40% home ownership rate? I think that you have to ask if breaking all the "natural" rules was worth pushing home ownership here in the USA from 50% up to 68%?
Note also that Canada did not have the real estate crash that we have. I also just read that 33% of home sales in Florida have been by buyers from Canada. If you have been following this, you have to ask why things are so different in Canada? You can only come to one conclusion and that is we made very stupid decisions here with all the alphabet soup agencies that encouraged home ownership. We were wrong and now we have to pay the piper. Not only do we have to pay the piper, we have to make a major change in our thinking about home ownership. When some politician preaches that they want to "help" you own your own home, be ware!
You know, the "Truth About Home Ownership".
