Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Zillow Inc (Z), Wells Fargo & Co (WFC), Bank of America Corp (BAC): The One Housing Statistic That’s Still Falling

Page 1 of 2

The housing market is recovering. Prices are higher. Volumes are picking up. And builders are feeling more confident.

But there’s one statistic that continues to fall: the homeownership rate. While this has led many observers to wonder whether we’re becoming a nation of renters, the data simply doesn’t support such a gloomy conclusion.

Zillow Inc (NASDAQ:Z)

A deceivingly dramatic decline
To be clear, the homeownership rate has dropped considerably over the past few years. At its peak in 2004, an estimated 69.2% of occupied housing units were owned by the people living in them. By the first quarter of this year, the percentage had fallen to 65%.

If you didn’t follow the housing market closely, you’d be excused for concluding that a roughly four percentage point decline in the homeownership rate is nothing to write home about. But once you start looking into the numbers behind the figure, it becomes apparent that this is a problem, or, at least, that it could cause havoc in the broader economy.

Look at it this way. In 2012, there were an estimated 114.5 million occupied housing units in the United States, 74.9 million of which were owner-occupied. That equates to a homeownership rate of 65.4%.

Now, assume that the rate had never declined from its high of 69.2% in the second quarter of 2004. Under this scenario, a further 4.3 million people would own their homes today as opposed to renting. That’s roughly 200,000 foregone home sales a year.

What’s behind the fall?
The question of what’s behind the fall in the homeownership rate is more nuanced. But while the evidence is circumstantial in nature, it’s still relatively clear.

“The recent declines in the homeownership rate can be attributed to the high rates of foreclosures, which forced many people to rent as they lost their homes,” said Zillow Inc (NASDAQ:Z) senior economist Svenja Gudell.

You can see this in the following figure, which illustrates the number of properties in some stage of foreclosure between 2005 and 2012. Before the crisis, fewer than 1 million properties had either been foreclosed upon, auctioned off, or were being held by banks following a default. By 2009, that number had shot up to more than 2.8 million.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!