Is homeownership 'over'?

Flickr photo by anemoneprojectors.

Throughout most of the three decades from 1969 to 1999, approximately 63 percent to 66 percent of U.S. households were homeowners, according to the U.S. Census Bureau. At the end of that period, the homeownership rate broke its historical bounds and climbed to 67 percent. In the next 10 years, the rate rose to 68 percent and then 69 percent.

Much of this rise in homeownership was driven by government policies. Homeowners have been rewarded with sizable income-tax deductions for mortgage interest and property tax, and the tax code also all but eliminated capital gains tax on the sale of a principal residence.

The result was a nation of property flippers who pocketed hundreds of thousands of tax-free dollars. Add an ocean of easy money and we had what looked like a lot of proud, happy new homeowners.

The people who earn their living from real property sales naturally were ecstatic: Homebuilding boomed. Realty and mortgage brokers earned some serious money. Real estate investment became profitable. And homeowners flush with equity went on a wild spending spree.

The folks in the apartment business were not so ecstatic. Indeed, they began to resemble short people at the rear of a very large crowd. They waved their hands above their heads, stomped their feet to make some noise and tried to get someone -- or anyone -- to listen to their message that renting a home was good, too.

Now, the homeownership rate has retreated to the 67 percent level of nine years ago. That's still historically high, yet it's lower than the peak and it's enough of a dip to beg an obvious question: Is homeownership over?

The question isn't frivolous, as the answer will affect the lives of every man, woman and child in the nation. If the age of homeownership is over, many more people will choose to live in rental housing and those who do decide to own their own home may have to learn to live with much less equity growth. If the age of homeownership isn't over, homeowners may have cause for celebration sometime in the future. Either way, the implications for government housing policy will be profound. ...CONTINUED

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