Now That's American!
As American as baseball and apple pie, realizing the American dream has always been associated with homeownership. In the second quarter of 2010, however, the number of homeowners realizing the American dream has dipped to the lowest level since 1999. According to a recent report by the U.S. Census Bureau, the rate of homeownership in the United States was just under 67 percent for the second quarter of 2010. According to the same report for the first quarter of the year, the homeownership rate was just over 67 percent. Unfortunately, homeownership figures continue to decline.
The S&P/Case-Shiller Home Price Indices, the leading measure for the housing market in the United States, reported Tuesday that home prices actually rose in May by 1.3 percent when compared to April. If home prices continue to rise, then it seems inevitable that the homeownership rate in the third quarter will continue to decline, forcing millions of Americans to rent rather than own.
The current housing price increases are sort of Catch 22. As housing prices and home values increase, the housing market heals. However, the rise in housing prices, coupled with the uncertainty surrounding the unemployment rate while our economy remains relatively unstable, will force prospective homeowners to remain as renters, preventing further healing within the housing market.
There is no disputing the fact that houses are no longer the investment vehicle they once were during the most-recent housing boom that resulted in today’s housing crisis. While homeowners used their properties as personal piggy banks, the economic collapse materialized. As unemployment rates continued to soar, combined with a drastic decline in property values, homeowners began to lose their homes in droves.
With millions of foreclosure properties remaining empty across the country, housing prices are on the rise nonetheless. While historically low mortgage rates remain in place as housing prices continue to rise, the time for prospective homeowners to realize the American dream may be passing.
One of two things needs to happen in order for the housing market to fully mend. Housing prices need to either level off or decline again, thus allowing potential homeowners to delve into homeownership, or the federal government needs to offset the housing price increases by offering further support to potential homeowners in the form of additional tax credits as an incentive to purchase homes. It clearly worked before. When the latest tax credits expired, purchases immediately began to decline to a virtual standstill.
When rates finally do begin to rise, it will be interesting to see where the housing market turns.
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