Housing rebound has been a leading indicator US economies anemic recovery in 2013 with homes prices rising in more than 48 States. Locally, in Silicon Valley home prices have appreciated more than 24% according to Santa Clara Association data on home sales. However, lost in translation is the decline of home ownership rate decline in the first quarter, hitting its lowest value since 1995, signaling that buyers face substantial challenges in the current market, according to US Census.
US homeownership rate declined to 65% in the first quarter, down from 65.4% during the same period in the prior year, according to a report from the U.S. Census Bureau. “Tight credit, tight for-sale inventory, the challenge of saving for a down payment, and more rental single-family supply all helped lower the homeownership rate,” according to Jed Kolko, chief economist at Real Estate web site Trulia.
We see the impact of these condition in San Jose, Los Gatos and Campbell markets daily where tight inventory is creating competing multiple offers and pushing prices to pre-crash levels of 2007. Some of the buyers are deciding to shelf their plans to purchase a home in 2013 due to these conditions.
Homeownerhip rates vary between different parts of United States. In the first quarter of 2013, the homeownership rate stood at 59.4% in the West, 62.5% in the Northeast, 66.5% in the South and 70% in the Midwest. The homeownership rate is defined as the Number of households that are occupied by owners divided by the total number of occupied households. The rate has declined fairly steadily for years, and is down from a peak of 69.2% in 2004, when the housing market bubble was in full blossom!
Low Interest rates were instrumental in the housing rebound in the 1st two quarters of 2013. However, the recent rise of these rates to their highest level in 2 years. Coupled with overly strict lending standards, these condition will cause some would-be borrowers from buying homes. Compounding the problem is the relatively high unemployment rates which are keeping more buyers from realizing their American dream of homeownership.
Developers and Home builders across the US have recognized this trend and are developing more apartment buildings. Recent government data showed that construction starts for structures with at least five units rose 82% over the 12 months ending in March, compared with a gain of 29% for single-family homes. Finally, Mortgage Bankers Association reported that first-quarter origination for commercial and multifamily mortgages rose 9% from the same period in the prior year.
In short, unless the structural problems of homeownership are solved with more inventory and better loans for buyers; this decline will continue for the balance of 2013.
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