The percentage of American homeowners is the lowest it has been in nearly 50 years. Home prices are rising due to investors buying homes.
How many Americans own their own homes? It depends on how you count.
The officially tally is about 65.5 percent. But according to Sean Fergus, a manager with John Burns Real Estate Consulting, that number includes 3.8 million homeowners who are 90 days late or more on their mortgage.
If you subtract those homeowners, which Fergus refers to as “renters in waiting,” the number of homeowners drops down to 62.1 percent. That’s the lowest percentage of homeowners in nearly 50 years.
Whether you believe in the official homeownership tally or the John Burns’ number, what’s really caught people by surprise is how quickly those numbers have collapsed.
Before the Great Recession decimated homeowners and wiped away trillions of dollars in home equity, as many as 69 percent of American households were homeowners. Losing 7 percent of all homeowners means more than 8 million families are no longer owning homes. They have become renters, or moved in with family members, or in some cases, literally joined the ranks of homeless.
Historically, the number of homeowners who are 90+ days late on their mortgage hasn’t accounted for much of a discrepancy in the published number. Indeed, Fergus notes that “the spread between the published and real homeownership rates has always been slightly below 1 percent.” Even in a strong economy there is always some level of payment delinquency.
But the company points to several reasons why the published homeownership rate might be more significantly overstated, perhaps by as much as 3 percent, including understaffed banks who are behind in dealing with the huge volume of delinquent mortgages; complications arising from loan modifications or foreclosures; banks’ fears of fees, sanctions or jail time (in Nevada!) for improperly documented foreclosures; government intervention in the foreclosure prevention process through HAMP or HARP; and borrowers who have taken advantage of the system, living for months or years in their homes, rent free.
The evaporation of trillions of dollars in equity has directly impacted the psyche of Americans. Despite the fact that the home prices seem to be rising slightly in the latest surveys (which is far better than falling), consumer confidence declined to 60.6 from 65 this month, the biggest drop in ten months, according to the Conference Board.
Unemployment levels rose in 44 states in July, according to the Bureau of Labor Statistics. Persistent unemployment levels above 8 percent, and as high as 12 percent (in Nevada), along with gas prices rising above $4 per gallon and increased economic uncertainty in Europe, are taking their toll on an electorate that is increasingly uncertain about its economic future.
Nervous homeowners don’t buy property. They get stuck, waiting to figure out which way the wind is blowing, trying to gain some clarity about their own job prospects.
But make no mistake: sales are up. Homes are being sucked up by real estate investors, who are buying homes in droves, sometimes in batches of 1000 or more directly from lenders and investors. And, home prices are rising, at least for the moment.
It is an investor-backed recovery, which is by definition unsustainable over the long run.
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