Canada's Housing Bubble

Apr 27, 2010 Mark J. Perry blog.american.com

According to data released yesterday by the Census Bureau, the U.S. homeownership rate fell to 67.1 percent in the first quarter of 2010, the lowest rate since the first quarter of 2000, exactly ten years ago (see chart below). Compared to the peak of 69.2 percent in the second quarter of 2004, the homeownership rate has fallen by more than two full percentage points in the last six years.

homeownership

Many economists and analysts would agree that the mortgage market meltdown, housing bubble, and global financial crisis resulted from the political obsession in America to increase homeownership with easy credit and government housing policies. Even the House of Representative’s Committee on Oversight and Government Reform concluded last summer that:

The housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans. In the short run, this government intervention was successful in its stated goal—raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy.

Bottom Line: Our political infatuation with homeownership turned thousands of good renters into bad homeowners and consequently turned the “American Dream” into an “American Nightmare” for many Americans. The fact that many homeowners are now returning to once again being good renters is a sign of progress, and the significant decrease in the U.S. homeownership rate to a ten-year low should be considered a very positive trend.