An article from the National Association of Realtors@ mentioned this situation so I thought I’d provide some insight into the background. The rate is down from 66 percent in the fourth quarter of 2011, 66.4 percent in the first quarter of last year and a high of 69.2 percent in 2004 before the housing bubble popped.
Historically the homeowner rate averaged around 65 percent give or take but in the early 1990s “the government” wanted to increase the rate to 70 percent or above. The thought was owners will take better care of their property than renters. This was a noble, logical conclusion and has been proven accurate in many neighborhoods. The challenge was how to increase the ownership rate. The easy answer: lower the lending standards to allow more buyers to qualify for a mortgage loan (unfortunately the loan default rate increased as these new homeowners couldn’t make their payments) . It took us about 15 years to see the results and it hasn’t been pretty (click here to read about The Law of Unintended Consequences).
There are some who believe “big banks” are to blame and there certainly is blame to go around. But I believe the pressure to increase the home ownership rate was equally to blame because 70 percent or so of the now deliquent loans were guaranteed by our government (Fannie Mae and Freddie Mac).
Care to guess who’s left holding the bag and will pay to clean up this mess?