Why Home Ownership in America is Declining

Did Americans wake up in 2011 and suddenly decide that owning your own home was so 20th century? We're pretty sure not. At American Monetary Association, we have a good idea that the average citizen still thinks home ownership is a pretty cool thing. Why the decline then? Why does a recent study by the Mortgage Bankers Association Research Institute for Housing America tell us that home ownership has fallen from an all time high in 2004 of 69.2% to a first quarter 2011 rate of 66.2%?

To be brutally honest, the real estate and financial industry is ridding itself (in a somewhat painful manner, to be sure) of those people who shouldn't have been homeowners anyway. Ouch! We told you it was going to hurt. Back in the early part of this century, loose credit standards and government incentives sent mortgage loan banks into a money lending frenzy. They'd give a mortgage to anyone with a pulse. Sounds great, right? The American Dream realized for every citizen in the land. Except by the time 2007 rolled around it was becoming painfully apparent that a large percentage of people who were holding mortgages had no real hope of making the monthly payments.

They simply didn't earn enough to afford the house they were living in.

Suddenly we were introduced to terms like “upside down mortgage” and “too big to fail.” The recession and wave of foreclosures made the emphatic point that tighter credit standards were imperative. Shutting off the spigot of easy money for borrowers, if you want to look at it that way. Ten years ago it was common for a buyer to get into a house and put little or nothing spielautomaten online of his own money into the deal. Five percent down payments were common.

These days, you'd be lucky to find a bank who would give you a mortgage with less than 20% down, and some are shooting for 25%. And with the government trying to turn Fannie Mae and Freddie Mac into private entities, it's a pretty good bet that creditors are going to check that you actually have a job and can afford the payments on the house before they write a check. Seems like common sense but, as recent years have shown us, human nature is common sense looking for a place to die. Unfortunately, for too many of your fellow citizens, it perished on the vine along with home ownership dreams.

The American Monetary Association Team

American Monetary Association

(Flickr / kevindooley)

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