Friday, February 24, 2006

Home ownership rate declines

More people own their own homes than in any time in history. More minorities own their own home than ever before. In California, a record number of resident aliens with work-permits own their own home. That said, higher home prices and rising mortgage interest rates may be taking their toll on the nation's home ownership rate.

The U.S. Census Bureau said recently the rate of home ownership was 69 percent in the fourth quarter 2005, down from the record 69.2 percent set in the fourth quarter in 2004.

It's the first time since 1994 that the rate (not the number) of home ownership at year's end hasn't increased from the previous year and the third quarter in a row that the rate hasn't posted a year-over-year gain.

The post-World War II economic and housing boom that gave rise to the suburbs fueled a steady climb in overall home ownership rates from 55 percent in 1950 to the record 69.2 percent in 2004.

By the end of the third quarter of 2004 home prices had risen more than 14 percent nationwide, according to the Office of Federal Housing Enterprise Oversight. Prices rose another 12 percent a year later, by the third quarter of 2005.

During the past five years when home prices rose a total of more than 55 percent, the 12.05 percent year-to-year increase by the third quarter 2005 was the smallest increase -- revealing the housing market is currently losing some of its luster. Rising mortgage rates are making it more difficult to own already expensive housing.

On February 23, 2005 Freddie Mac's Weekly Mortgage Market Survey put the average fixed interest rate on 30-year conforming loans at 6.26 percent, up from 5.69 percent during the same period last year. Adjustable rate mortgages are up substantially too. During the same period five-year ARMs averaged 5.96 percent compared to an average 5.05 percent a year ago.

In some instances, interest rates are rising faster than home prices are falling and that's offsetting the potential for greater affordability that comes with falling home prices.

Home ownership rate was highest in the Midwest at 72.8 percent, followed by the South at 71.1 percent. The Northeast at 65.4 percent and the West, at 64.6 percent were lowest. California, Hawaii, Massachusetts and New York are among the states with the lowest rates of home ownership; Alaska, Delaware Michigan and West Virginia are among the states with the highest rates.

Have a nice weekend. I will be taking a loan application on Saturday and having an open house on a new listing in Cameron Park on Sunday. If you want to preview the new digital technology that I now use to feature my listings, go to my web site at and click on Featured Listings and Virtual Tours. If you know someone who is looking for an affordable home in El Dorado County, please forward them the link. Thanks.


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