The Blessing in the Homeownership Plunge

The homeownership rate is the lowest it has been in almost fifty years, but that isn’t ALL bad.

Here is yet more evidence that Americans are right to be afraid of the Obama economy and the mythical Obama recovery. As CNBC reports, “Homeownership rate drops to 63.4%, lowest since 1967.”

The U.S. homeownership rate fell to 63.4 percent in the second quarter of 2015, according to the U.S. Census. That is down from 63.7 percent in the first quarter and from 64.7 percent in the same quarter of 2014. It marks the lowest homeownership rate since 1967.

Homeownership peaked at 69.2 percent at the end of 2004, when the housing market was in the midst of an epic boom. The 50-year average is 65.3 percent.

“It is now just five-tenths from the record low seen in 1965 in data going back also to 1965,” noted Peter Boockvar, an analyst with The Lindsey Group. “All the governmental attempts (certainly aided and abetted by many players in the private sector) at boosting homeownership has gotten us to this point in time with all the havoc it wreaked over the past 10 years. It’s just another governmental lesson never learned, of don’t mess with the free market and human nature.”

I salute CNBC for admitting that the attempt to blow a housing bubble was a disaster for housing. Even before Obama, Bush was leading us down this self-destructive path.

But the good news is that now we can allow people to decide for themselves whether or not home ownership is a good idea. In fact, we have an opportunity to end the remaining incentives that artificially discourage renting and encourage buying a home.

Household formation, however, is rising. The number of occupied housing units grew, but all on the renter side. The number of owner-occupied units fell from a year ago. No wonder both rents and occupancies continue to soar.

Maybe that’s the way it ought to be. Maybe, contrary to public opinion, landlords offer a needed economic service by taking on the risk of property investment. Perhaps that leads to a better outcome for everyone than encouraging everyone to believe that buying a home is a risk-free investment.

In any case, now that we have reset to 1967, we would be wise to leave the housing economy alone.

But is there any chance that politicians will do the wise thing?