Housing sector businesses wouldn’t like to be reminded about 1995—a time when housing ownership rates were at an all-time low. The real estate market was in the dump, and it was hard on agents and brokers. This trend repeated itself during the last quarter when homeownership rates across the nation dipped to their 18-year lowest. It seemed that pessimistic lending practices and increasing foreclosures had finally taken their toll. However, this quarter, things seem to be on the rebound. The homeownership rate has jumped by 0.3%, to 65.3%, injecting much needed enthusiasm across the industry.
Why this housing upswing?
Industry data suggests that the number of homeowners in the United States is slowly increasing. The sector is witnessing diminishing negative equity and lesser foreclosures. More probable homebuyers are being converted into actual homebuyers. Purchase enquiries are on the rise and the bracket for eligible buyers has become more accommodating.
With employment levels rising across the nation, families who had been suffering from dented credit histories now have a real chance at repairing their buying profile. Many Americans had been pushed from being homeowners to renters during the last 5-to-6 years. The trend now seems to be reversing with more serious homebuyers seeking permanent, self-owned residences.
Will this positive trend sustain?
With the economic crash of 2008, young people and minority-sector home ownership had witnessed the sharpest decline. However, minority ownership rates too are now on the rise. Further assuring that this is a trend and not a temporary flourish, people reconsidering homeownership has shown steady numbers too. This signifies that mortgage buyers are now ready to make serious contributions towards recovering their households that were lost in the aftermath of the economic crisis.
Home vacancies have been often used as an important parameter for evaluating homeownership sector trends. However, the home vacancy rate has remained largely unchanged. A slightly confusing aspect has emerged here with many vacant homes being kept off the market. These properties aren’t being sold or listed for rental purposes.
Buoyant Now, Cautious as We Move Ahead
Overall, the optimism at this point is guarded. Industry analysts say that these are early indicators. These shouldn’t be misjudged for a revolutionary change in the housing sector. In the recent past, encouraging rise in home sales has been often followed by long declines. Borrowing costs weren’t very favorable until last September when contracts for buying previously-owned homes stumbled.
It should be noted that improvement in credit-performance isn’t likely to make huge leaps. This is a gradual process where financing and lending institutions will make mortgages more accessible but not without covering their risks.
Yes, the industry mood seems rather positive at the moment. More loans are being extended to people showing serious signs of credit recovery. Even the banking sector seems in active mode with the central bank’s stimulus likely to carry on for some more time. With mortgage approval rates rising and even the home construction sector in the upswing, this trend is likely to sustain through 2014.