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Freddie Mac: Pay no attention to homeownership rate

WASHINGTON – Oct. 14, 2016 – For over a decade, the national homeownership rate has been declining. It peaked at 69.2 percent in 2004, but for the past 10 years, the rate continued to fall.
Today the homeownership rate is less than 63 percent, the lowest in half a century. Some industry analysts are predicting further declines too, saying the homeownership rate could drop below 60 percent.
In new Insight posted at Freddie Mac’s website, however, the mortgage giant says such doom-and-gloom projections ignore potential macroeconomic influences that likely will have a significant impact on the homeownership rate’s future.
For example, the future of housing finance has yet to be sorted out, Freddie Mac notes. The government-sponsored enterprises (GSEs: Fannie Mae and Freddie Mac) are in their eighth year of conservatorship, and that will change at some point.
“No one knows when a consensus on the complex issues surrounding housing finance will be reached in Congress, but whatever choices are made will surely influence the future path of homeownership,” the report notes.
Also, millennials may still play catch up. One day soon they may finally decide to get married, raise families and buy homes – and when that happens, it could occur at a faster pace than it did with previous generations.
Sean Becketti, Freddie Mac’s chief economist, says projections that homeownership rates will drop also fail to take into account that today’s millennial 35-year-olds may not act exactly like today’s baby boomer 55-year-olds.
Further, factors that slow home buying in non-white demographic groups may be overcome, according to Freddie Mac.
Becketti says other studies predicting a drop in the homeownership rate fail to take into account such “future macroeconomic disruptions, significant policy changes, or shifts in social attitudes in their calculations.
“In either case, we believe their projections may be overly pessimistic,” Becketti says. “The income and education gaps that are responsible for some of the differences may be narrowed or eliminated as the U.S. becomes a ‘majority minority’ country. And as these types of potential homebuyers comprise a larger and larger share of the population, it will become increasingly expensive to overlook them. Profit-oriented financial institutions will be motivated to find better ways to serve them.”
Source: “Why Are the Experts Pessimistic About the Future of Homeownership?” Freddie Mac (Oct. 12, 2016)
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Source: Florida Realtors Feed

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