Time To Trade The Lease For A Mortgage?
This week, the U.S. Census Bureau announced that in the first quarter of 2012, the American homeownership rate hit its lowest level in 15 years. During the housing boom, millions more Americans bought homes, bumping the rate to nearly 70 percent. Now, that buying spree has been replaced with millions of foreclosures, and most of those gains have been lost.
As the homeownership rate keeps falling, it has also become a very good time to buy a house. Very low interest rates, courtesy of the Federal Reserve, and falling prices are making it even cheaper to buy a house these days. Meanwhile, rents are rising around the country.
Ibeliz Rosa, 34, says she's been noticing the prices. Rosa works for a state adoption agency in Boston and her husband is a police officer. She says her landlord is raising her rent again this summer, up to around $1,600 a month for a two-bedroom apartment, and with two young kids, it's starting to get crowded.
"Our rent is like a mortgage right now," Rosa says, "so that also motivated us to get the goal that we wanted, which is a single home."
The couple has been approved for a loan through the nonprofit housing lender NACA and is in the process of buying a three-bedroom ranch house in a suburb outside Boston. Rosa says the house has a nice big backyard.
"I had a yard when I was growing up and I loved it," she says. "So I wanted a yard for the girls to be able to run free."
The American dream of owning a home appears to be alive and well, and, in most places, it's a good time to buy again.
"For big swaths of the United States, it now makes sense to buy and not rent," says Mark Zandi, chief economist of Moody's Analytics.
Nobody wants to see a return to the reckless lending days of the housing bubble, which boosted homeownership to an unnatural level, but the question going forward is this: Must the country return to its 1995 pre-bubble rate of around 64 percent homeownership? The rate has already fallen back to 65.4 percent.
NACA CEO Bruce Marks doesn't think so. He says lending standards have gotten too tight since the housing crash. "We've gone too far to the other extreme," he says.
According to Marks, millions of renters who are able to afford rental payments — especially as they've risen — should be able to qualify for home loans. So far, though, foreclosures are outnumbering first-time homebuyers, so the homeownership rate keeps falling.
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