Why Real Estate Professionals Should Care More about Economic Growth than the U.S. Homeownership Rate
The U.S. homeownership rate recently fell to its lowest level since the Census Bureau began tracking the figure in the mid-1960s. At 62.9 percent, many real estate professionals are concerned about what this means for their livelihood. On first take, the falling homeownership rate seems to be a reason for concern, but this is not true. Demand for housing is up, real estate value is up, and home equity levels continue to rise.
Politicians may be tempted to use the current homeownership rate as a reason to pass polices that attempt to expand home affordability, but this would be misguided. Federal efforts to expand homeownership through government-backed loans and Government Sponsored Enterprises (GSEs) in the mortgage industry artificially increased the homeownership rate to nearly 70 percent. This proved unsustainable as the housing bubble eventually popped and helped fuel the Great Recession in 2008 where over $9 trillion in home equity was wiped out.
While owning a home is a good thing for many Americans, federal policy should not explicitly encourage homeownership. Instead, federal policy should focus on creating an environment that encourages economic growth, more employment opportunities, and higher wages. Lowering tax rates will allow Americans to keep more of their hard-earned money. Reducing regulation in the financial sector will allow businesses to access the capital they need to start and grow their business, which in turns leads to more employment opportunities and higher wages.
Economic growth will empower consumers to buy homes that are right for them, without the federal government undermining the housing market and risking taxpayer dollars. At the end of the day, real estate professionals should care more about policies that encourage economic growth, than the U.S. homeownership rate.