May 14, 2008

One Step Forward, Two Steps Back

One of the great things about the US is the incentives built in to encourage homeownership, such as the mortgage interest tax deduction. Owning a home has been equivalent to the American dream and for many, a way to build wealth as the equity in their home increases and appreciates.

While homeownership made great strides during the last housing boom, the homeownership rate, not surprisingly is on a fast decline. Bankrate notes how the rate peaked in 2004 (surprise, surprise) and has been on a steady demise since. Many theories have been offered and the most interesting one and the one I subscribe too - is one where the rate just grew unsustainably and now we are getting back to normal, thanks to foreclosures and such.

Since 2004, when 69.2% of the housing units were occupied by owners, the rate has decreased to 67.8%. Still, that’s a good number in my book. I tried to gather some data on what the rate is in the bay area, but most of the information I came across was dated. However, the old data did point to a low rate of ownership in San Francisco and Alameda, the rest of the counties somewhat tracked just below the national rate.

So, I’ll keep digging for data but in general, what is a healthy rate of homeownership? And should it be different based on the economics of the area?