Posted July 19 2010, 9:00 AM PDT by Matthew Gardner, Chief Economist, Windermere Real Estate

The Future of Homeownership

Posted in Buying and Market News by Matthew Gardner, Chief Economist, Windermere Real Estate

Homeownership has been pushed by the past two presidents and certainly contributed to the financial meltdown that we experienced in 2008 and are still recovering from.  I thought that this month’s blog should look at homeownership from where we were, to where we are and looking forward to what the future holds.  Many agents have been telling me that fear is holding back buyers and, in some cases, sellers in today's market. Clients have many questions relative to the future of housing in general, as well as effecting their own situations.

If we look back in history, we note that home ownership rates averaged about 63 to 64 percent from 1965 to the early 1990’s.  It was then that George W Bush started to push the goal of increased ownership and this was echoed by President Clinton.  With the lax lending standards that came into play at that time, we saw ownership rates skyrocket to about 70 percent.

So where are we today? The official rate is 67.1 percent, which is still far higher than the historical average and back at levels not seen since 2001.  One thing remains clear and that is that we will certainly see this rate reduce as we continue to see increasing foreclosures.

There are a number of factors, however, that suggest that homeownership rates, although headed lower and back to historic norms, should not overcorrect. These are as follows:

1. Social Policies – as mentioned above, our elected officials like homeowners as it results in neighborhood stability, as well as building equity.  However, there needs to be a balance as the excess demand was driven by lax lending that cannot return.

2. General Housing Affordability – With the price declines that we have seen, housing affordability has not been better in many years.  Historically low interest rates also impact affordability.

3. Aging Population – as the population ages, ownership rates increase.

4. New Households – the echo boom generation is upon us and every year there are millions of young people who fly the nest, heading out into the world and in need of shelter.  This figure far exceeds households lost to death. That being said, as many know, if there are no jobs available, they are likely not to fly without considerable pushing!

So what does this mean? The likelihood of an overcorrection, assuming that lending policies by GSE’s such as Fannie Mae, Freddie Mac, and FHA do not change dramatically, is slim.



  • [...] offers his insight into the future of home-ownership by looking at the past, in this recent blog post.  His conclusions are optimistic for our region and he feels there is reason to believe that [...]

    Posted September 05 2011, 1:35 PM by Rent vs. Buy

  • Matthew, yes, the Puget Sound Regional Council is the group that did those forecasts, the report I read was from ULI. No matter whose forecasts they are, even if just half the numbers arrive or are born here, a whole lot of them will want homeownership. In reading the reports, I felt the biggest question was why only the 4 counties participated. Were other Puget Sound regions excluded for a particular reason, or were they just not 'interested' in participating? Count me in in any future meetings, I want to go.

    Jason, the aging baby boomers for the most part are seeing more opportunity for themselves away from the cities. For example, the population on Whidbey Island -- the 6th most populated county out of the 39 counties in Washington State -- is seeing a huge rise in incoming population in the over 60 age group. Housing is less expensive in Island County than in King County is certainly a factor.

    But I also see with the rise of Sounder train transportation the ability for more people to find successful jobs in King County employment bases, yet be able to live in the less expensive surrounding communities. For example, the Whidbey Island Clinton/Mukilteo ferry commute is a 20 minute ferry ride, and connects with a very short walk to both bus and commuter train to downtown Edmonds and downtown Seattle 4 times each morning, and 4 times each afternoon.

    I started selling real estate in 1983. I saw a lot of damage from the deep recession started in 1981/82, and even then, I saw resilience in attitude: "we want to own our home". People want to own for a great many reasons, and one of the most important reasons is control of your environment. Would you really remodel a kitchen in your landlord's home? No, and neither should the landlord allow you to do that :-).

    There is a populist trend right now that says maybe renting is better than owning. Maybe short term, for some, but not for everyone. I've known many people who rented a home for 20+ years. Not once was that a better decision than finding a way to own something.

    For young people today, home ownership is definitely possible. Interest rates are incredibly low, and FHA mortgages allow low down payments, and even co-signers. In the '80's, most of my first time buyers had family help, either with down payment money, or with parents co-signing a loan. It made buying homes in an era of very, very high interest rates possible.

    There is nothing wrong with family help, nor is there anything wrong with saving up until you can do it yourself. But an entire country of fence-sitters isn't positive for anyone. It's time to get out and check out the excellent selection of homes and condominiums. Some will choose to buy, some will choose to rent.

    Posted July 26 2010, 5:31 AM by Leanne Finlay

  • On your Pt 4. This to me is the most interesting - on the one hand I believe you are correct young people will leave the nest and need a place to call 'home.' However, where I struggle with this is: will these people be able to afford a home where either a) their job is or b) they want to live. When you look at the increasing density of urban areas and the resulting increase in both "desirability" (for many young people) and the price of real estate in these markets - I question if we are headed for a generation of renters where inherited wealth/real estate is the single largest predictor of one's ability to purchase a home.

    Posted July 25 2010, 10:29 AM by Jason

  • Leanne - You are quite correct in your statement relative to population growth projections through 2040 although the source is incorrect. The Puget Sound Regional Council has an obligation under the Growth Management Act to provide long-term forecasts and it is they that came up with those forecasts for the 4-county region.

    I was lucky enough to be invited to a Vision 2040 conference a few years ago to look at the issue of growth in our region and where we would put all of these people if they arrived! As you can imagine it was very challenging and, hopefully, opened the eyes of our elected officials who have to influence our growth going forward.

    With the topographic constraints that we have here in Seattle, in concert with our stringent growth management policies, it is not unreasonable to conclude that we will be constrained (in the long-term) relative to housing supply and this will likely lead to higher values unless we address this critical issue.

    Posted July 21 2010, 4:21 AM by Matthew Gardner

  • Matthew, another point is the growth rate expected. From the 2007 Urban Land Use Institute studies all across this country, the predictions were for large in-migration. In the Puget Sound Region alone, we are expected to grow by someething like 1.7 million people over the next 40 years -- for a visual comparison, think a city the size of Portland, OR moving into the Pac NW region.

    Perhaps it will turn out that those predictions are a little lower. Maybe yes, maybe no, but our region is gorgeous, we have excellent employers, and we are going to grow.

    Homeownership is a worthy goal.

    Posted July 21 2010, 12:55 AM by Leanne Finlay