Real Estate and the Middle Class
As candidates from both parties jump
into the 2016 presidential race, here’s
one point they would all do well to keep
in mind: Economic inequality is growing,
upward mobility is stalling, and the middle class is shrinking. These issues are of
foremost concern to the United States
and to real estate.
Over the past decade, renter households have grown by 8 million, while
home owner households have fallen by
2 million. As a result, the country’s home
ownership rate has fallen to a 20-year low
and now stands at 63.9 percent.
With 20/20 hindsight vision, we can
see some of the decline was inevitable be-
cause of the loose mortgage standards
that drove the home ownership rate to
unsustainably high levels. Now, however,
lending requirements have swung so far
in the other direction. What’s more, due
to widespread housing shortages, home
prices are rising too fast relative to the
income of would-be buyers.
Given that home owner wealth is
typically far greater than renter wealth,
simple math will tell you that the rising
ranks of renters and the shrinking ranks
of home owners are a key indicator of the
growing inequality across the country.
Here are two ideas that would mitigate
these negative trends:
b Return to a happy medium for lending.
Reduce government guarantee fees,
lower FHA insurance premiums, and
limit bank lawsuits.
b Lessen onerous new financial regu-
lations on small banks. Community
banks are the most important source
of financing for small builders,
historically the biggest producers
of single-family homes in the United
States. Since these banks do not
cause systemic risks to the economy,
let them make loans without having
to follow the costly and burdensome
regulations that were imposed after
the downturn. More supply from small
builders will relieve inventory short-
ages and tame home price growth.
These policy changes will give more
people a chance to build wealth through
home ownership. More home building and
more home sales accelerate job creation
and wage growth. The country’s gross
domestic product could rise to 3 percent
or better, compared to the 2. 2 percent average annual growth we’ve seen since the
recession. Candidates: Let the debates
over boosting prosperity begin.
Lawrence Yun is
NAR chief economist.
Home buyer demographics have shifted
dramatically. The share of homes bought by
single women has fallen 33 percent since 2006,
while unmarried couples’ portion has jumped 36
percent. Married couples’ ownership has increased
10 percent, and single men’s share is unchanged.
Source: NAR Research
Index showing continued improvement moving into summer. But inventory shortages and price
increases continue to pose hurdles.
SUPPLY & DEMAND All trend lines are from March 2014 to March 2015.
EXISTING-HOME SALES Seasonally adjusted annual rate, which is the actual rate of sales for the month,
multiplied by 12 and adjusted for seasonal sales di;erences. 2014 data reflects final seasonal adjustments.
INVENTORY Number of existing homes on the market at the end of the month.
PRICE National median.
5. 19 Million