April 14, 2009

History of homeownership rates

On my post "Home foreclosure rates past and present.", a commenter, Randy, asked about historical home ownership rates versus foreclosure rates.

Randy's comment:

"Have you looked at foreclosure rate graphed with home ownership rates? My understanding is that home ownership reached new highs in the last few years, I would think foreclosure rates would have followed (but delayed)."

First lets look at historical home ownership rates.

The census tracks home ownership rates. Here is a table of home ownership rates for the US and per state for each of the 10 year census from 1900 to 2000. We can also find more recent home ownership rates from 1900 to 2007 in the 2009 Statistical Abstract. Using those two sources I can plot a graph of the home ownership rate over the past 100 years:

You can see that from 1900's to the 1940's the rate was fairly stable in the 40% range. Then from 1940 to 1960 home ownership increased substantially and jumped up to the 60% level. From 1960 until today the home ownership rate has been in the 60% range and has gradually gone up over the decades. Note that most of the census data is only for 10 year intervals so it doesn't show every year. I could probably find some more data for individual years by pulling it out of historical statistical abstracts but I doubt that there was much variation in home ownership for any given 10 year period.

How does the home ownership rate compare to the foreclosure rate? Below I've charted the rate of foreclosures versus the home ownership rate.

The home ownership rate is the pinkish line with the figures on the left column. The foreclosure rate is on the blue line with the figures on the right column. Both have been generally trending upwards over time. Given the data I looked at, I don't see any direct relationship between home ownership rates and foreclosure rates.

Now this is not to say that there isn't any relationship between the two. Obviously if you gave everyone in the country a home that they couldn't afford then there would be 100% home ownership but the foreclosure rates would increase. Another thing to consider is that the data on home ownership rate doesn't tell us how affordable those homes and it doesn't tell us how many people have mortgages. Home ownership alone doesn't really give us a good predictor for foreclosure rates. What if 75% of us owned homes but only 10% of those people had a mortgage and the rest owned the homes outright? What if 50% of us owned homes and 90% of us had mortgages? I think that such things as the affordability of the homes in relation to wages, the level of equity in homes, and general economic conditions would probably show more direct relationship to foreclosure rates than simple home ownership rates.

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