A study conducted by the Federal Reserve Bank of New York concluded with the prediction that the U.S homeownership rate will continue to drop over the next few years. In a staff report, entitled "The Homeownership Gap," Federal Reserve economists
Andrew Haughwout, Richard Peach and Joseph Tracy noted that the homeownership rate in this country reached an all-time high of 69% in the third quarter of 2006 and dropped 1.7% over the next three years to 67.3%, which was the lowest it had been since the
second quarter of 2000.
The report stated that increasing unemployment and foreclosures, combined with decreasing housing prices have led to this rate decline. The economists also noted the higher percentage of negative-equity households, where more is owed on the mortgage than the
home is worth. This trend will lead to less "household mobility," due to the fact that people in this situation "need to delay a move during the period they are rebuilding their savings." They site Census reports to point out that "the number of households
moving is at its lowest point since 1962."
"The current severe house price cycle, combined with borrowers who had little or no equity at origination of their mortgages, has led to a dramatic rise in homeowners with negative equity," the report said in its conclusion. "This situation is likely to put
downward pressure on future homeownership rates, and has potentially important implications for the maintenance of the
housing stock, the stability of neighborhoods, and future household saving behavior."
What does this survey say for the current state of the US economy and the housing market? Where is our country headed? What do you think?