July 05, 2017
U.S. Post-Recession: Why Is There Still Low Homeownership?
Interest rates are low and the job market is improving, so why is there such low homeownership in the United States right now? To find out, The National Association of Realtors commissioned the Rosen Consulting Group (RCG) to conduct a study. Released this month with the Fisher Center for Real Estate and Urban Economics, “Hurdles to Homeownership: Understanding the Barriers” explains the significant barriers to homeownership.
Crippling Student Debt
Millennials are being crippled by massive amounts of student debt. The high interest rates of government and private loans are burdening them with potentially decades of debt. Without policy changes, Millennials will struggle to save up for down payments and qualify for mortgages.
Unaffordability and Shortage of Single-Family Homes
With high costs and a shortage of skilled labor, construction of new homes in 2017 has nearly halted. Without new homes, the market will become increasingly more competitive and home prices will rise. According to the report compiled by RCG, from 2016 to 2019, the affordability of homes will decrease by nine percent.
Mortgages Beyond Reach
During the Great Recession, mortgages were being approved at astronomical rates because of extremely low standards. Since then, standards have increased, but the rate at which borrowers are being approved for loans has not normalized. In fact, loans are farther out of reach now than before the recession in 2003. Even people with good-to-excellent credit are struggling to qualify.
Changes in Financial Decision-Making Post-Recession
During the Great Recession, 8.7 million people became unemployed and 9 million homeowners experienced foreclosure. As a result, people’s attitudes and behaviors around financial decisions have significantly altered, which has contributed to low homeownership. People who are now able to purchase homes are less willing to buy homes after suffering through foreclosure.
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