It is not often that I go out on a limb and make a prediction about the future. That is because if I could predict the future, I would be on a 200 foot yacht in the Greek Islands. However, sometimes I just can't resist. What bottom am I predicting? The rate of home ownership in America. It has been falling for nearly a decade and in the fourth quarter of 2014, it hit the lowest level in over two decades at 63.9 percent, according to the National Association of Realtors.
The peak for the home ownership rate was just under 70% during the real
estate boom. Why is it going up from here? There is a few reasons. For
one, it is getting easier to own a home because credit standards are lower.
Secondly, the cost of renting keeps going up and it just makes more economic
sense to own. When renting is more expensive than owning, before the benefits of
tax deductions and the forced savings of principal reduction are taken into
account, then the economic message can't be ignored.The most important reason? The time is right. More jobs are being created and that means the rate of household formation is increasing. A report recently issued by the Lusk Center For Real Estate at the University of Southern California indicates that we are now at pre-recessions levels of household formulations. That means that the Millennials are moving out and they will need places to live. The first quarter of 2015 statistics have not been released yet, but we think I are at or near the bottom and the rate of ownership will rise from here unless there is a major intervening economic variable.
Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.735.5261
C: 650.766.8500
No comments:
Post a Comment