In the last few days, two housing stories caught my eye.
The first was from the Wall Street Journal, where reporter Ruth Simon looks at Census Bureau data that indicate that after climbing steadily for a decade, the United States' homeownership rate has leveled off.
Here's a telling excerpt from Simon's article:
It's not entirely clear why the homeownership rate seems to have plateaued. Some economists say that the new data could be a sign that declining affordability is finally taking its toll on first-time home buyers.
Then the New York Times tells us that over the last decade, homeownership among minorities passed the 50 percent threshold, crossing that mark in 2004. That positive news, however, belies a troubling trend.
According to that story, "… in the last several years, neighborhoods with large poor and minority populations in places like Cleveland, Chicago, Philadelphia and Atlanta have experienced a sharp rise in foreclosures, in some cases more than a doubling … ."
It seems that many home buyers are learning the hard lessons of getting and keeping, and that they're two different things.
For some, based on the Wall Street Journal report, getting into a home is the major problem. All the attention lately has been on a housing bubble, worrying whether owners will end up losing money on houses they purchased a few years ago.
But that bubble has, in essence, acted as a force field for many buyers, especially those looking to get into their first home. This phrase from the WSJ article jumped right out at me: declining affordability.
We bought our first residence, a condo, in the Washington, D.C. suburbs back in 1982. To get into the two-bedroom apartment (with two baths, small terrace, separate dining room and a nice little wood-burning fireplace in a corner of the living room), we had to sell my husband's car to come up with the down payment. My car was newer, so we kept it.
The few thousand we got for his Pontiac Grand Prix was enough to get us into our first home. I can't imagine any young couple being able to pull that off nowadays, especially in the national capital region or any other major metropolitan area. Again that phrase: declining affordability.
Lower interest rates over the past few years have helped a lot of buyers get into some of today's pricier homes. But when prices kept going up for basic housing, not just for estate-type residences, many buyers had to look for creative mortgage options: ARMs, nothing-down loans, bridge loans to cover a down payment, interest-only mortgages. The list is limited only by the lender's and buyer's imaginations and willingness to take a chance.