New data released from the Census Bureau shows that homeownership has fallen to its lowest levels in 18 years to 65 percent.
Prior to the implosion of the housing bubble in 2008, homeownership hit a record high in 2004 at 69.2 percent. From 1994 to 2004 homeownership had steadily been rising as new job markets opened up and the economy was expanding at a rapid pace. Now, lenders are being more cautious about who they loan out money too.
How Do Homeownership Rates Affect My Mortgage?
Homeownership rates, unlike mortgage rates, don’t directly impact anyone’s mortgage. Rather, they are an indicator for the overall health of the economy and the housing sector.
One of the consequences of not as many people owning their own home is the increase in the number of renters in the market. Thus, according to the laws of supply and demand, this pushes up the cost of renting. If previous trends are any indication of how things will shape up in the future, there still may be one or two more years of depressed homeownership before the market hits prerecession levels.
What Can Be Done To Improve Homeownership Rates?
Economists differ on what is the best approach to get more Americans into homes again. Richard Barrington, of Money Rates, believes that current homeownership levels are reasonable and that the government should not encourage people to take on mortgages that they may not be able to afford.
According to Barrington, “In the heat of the housing boom, mortgage lenders pushed the envelope too far in terms of whom they allowed to qualify for a mortgage. A more selective population of home buyers should also be a more stable one.”
Meanwhile the housing industry has been lobbying lawmakers to make it easier for more people to take out a mortgage. The task of lawmakers is to walk the line between helping to keep rates reasonable for risky borrowers and to make owning a home appealing to first time home buyers.
Programs such as HARP and FHA streamline loans have been effective at helping homeowners lower their interest rates and reduce their monthly payments. Accordingly, they’ve helped many people stay in their homes by making it less likely that they go into foreclosure. But they still don’t solve the problem of attracting new buyers to the market.
What Programs Are There For First Time Home Buyers?
FHA loans and VA loans are just two of the federal mortgage programs out there that can help you get into a home. What’s unique about these two programs as opposed to many other types of conventional loans is that they are backed by the federal government. The federal government assumes much of the risk in the case that the borrower defaults. This allows lenders to offer them to borrowers at lower rates.
FHA loans are backed by the Federal Housing Administration. And VA loans are backed by the Department of Veterans Affairs. Another advantage of these types of loans is that they offer low down payments. For VA loan it’s even possible to get a loan with no down payment. Additionally, these loans can often be acquired even in the case that the borrower’s credit isn’t all that great.
Owning a home still remains one of the central dreams for many as they enter the workforce and look to settle down. There are a number of programs out there to help ordinary people realize their dream of owning a home of their own. Even if you don’t have the best credit and can’t afford to put that much money down, there are still government programs that can help you get an affordable mortgage that you can live with.
