There was fresh data from the government Tuesday showing that the American dream of owning a home is fading fast.
The share of all U.S. privately-owned houses that stood empty fell in the fourth quarter to its lowest since 2006 as the number of houses occupied by renters rose faster than the pace of new vacancies created by homeowners moved out, according to the Commerce Department. There number of housing units occupied by renters rose by 749,000 in the fourth quarter compared to a year earlier; some 91,000 fewer homes were occupied by owners, the data show.
With the fast pace of foreclosures showing no sign of letting up, the U.S. homeownership rate continues to fall. Just 66.0 percent of U.S. homes were occupied by their owners in the fourth quarter of last year – half-a-percentage-point lower than a year earlier. That’s the lowest level of homeownership since the second quarter 1998.
The steady rise in demand for rentals has tightened the supply of housing, helping to push rents higher. Homebuilders report that the market for multi-family units has been a lone bright spot in the overall housing market. While the pace of new household formations has lagged historical averages, those new households are becoming renters. That trend is likely to continue until would-be home buyers gain more confidence that the housing market has bottomed, according to NAHB Chief Economist David Crowe.
Despite the ongoing high rate of default and foreclosure, the share of houses that stood empty fell in the last three months of last year. Part of the reason may be that bankers have been trying to match the pace of new foreclosures to the sale of homes they’ve already seized, waiting to sell a house before closing out the foreclosure of another one. By letting homeowners remain, banks can reduce the cost of maintaining a house until they’re ready to put it on the market.
Though the overall share of houses that stood empty fell slightly at the end of last year, it remains high by historical standards. A separate report by the Government Accountability Office in November, based on Census data, found that the number of vacant, non-seasonal, residential properties increased 51 percent nationally, from nearly 7 million in 2000 to 10 million in April 2010.
The homeownership rate will likely continue to fall until the pace of foreclosures begins to ease. So far, public and private efforts to modify loans to allow homeowners to stay put haven’t kept up with new defaults. With home buying demand weak, those newly-vacated homes will continue to weigh on home prices.
By the end of the third quarter of last year, some 12.6 percent of homeowners with mortgages – or more than 6 million homeowners - were either delinquent on their payments or in foreclosure, according to the Mortgage Bankers Association. Roughly 22 percent of residential properties with mortgages were underwater at the end of the third quarter, according to CoreLogic.
“Add to this the currently high unemployment and underemployment rates, one gets a recipe for further price declines,” said Patrick Newport, an economist at IHS Global Insight. “Our view is that foreclosures, excess supply, and weak demand will drive prices down another 5 to 10 percent.”