Headlines – Week of November 14, 2010
November 22, 2010
Homeownership stays at lowest level in a decade
According to an article by The Associated Press writer Alan Zibel, the nation’s homeownership rate remained at its lowest in more than a decade, hampered by a rise in foreclosures and weak demand for housing.
The percentage of households that owned their homes was unchanged at 66.9% in the July-September quarter, the Census Bureau said Tuesday. That’s the same as the April-June quarter.
The last time the rate was lower was in 1999, when the rate was 66.7%.
For decades, 64% of American homes were owned by their occupants. That began to climb in 1995, as both Congress and various administrations pushed for mortgage buyers Fannie Mae and Freddie Mac to purchase more loans targeted toward low-income Americans.
Homeownership hit a peak of more than 69% in 2004 at the height of the housing boom. But the housing bubble burst in 2006 and the rate has been declining gradually since then.
A record number of foreclosures and tight lending standards are expected to keep pushing the homeownership rate down and it will eventually return to pre-1995 levels according to IHS Global Insight.
About 18.8 million homes, or 14.4% of all houses and apartments, were vacant, according to a government survey. Without vacation homes, that rate would be 11%.
The number of vacant homes has soared over the past four years from about 16 million at the start of 2006. It has been hovering around 19 million since the end of 2008. There are around 131 million housing units nationwide, according to the Census Bureau.
About 2.5% of all primary residences were vacant and for sale and 10.3% of all year-round rental units were listed as vacant and for rent.
Banks have seized more than 816,000 homes through the first nine months of the year and are on pace to seize more than a million, according to foreclosure listing service RealtyTrac Inc.
31% of defaults could be strategic
According to an article written by Marcella S. Kreiter for United Press International, the financial crisis and ensuing recession apparently changed the mindset of Americans toward their homes, turning what long has been the American Dream into just another financial investment.
The result has been an increase in strategic defaults, a term used when people walk away from property and mortgages not because they have to, but because they can.
Some experts estimate nearly a third of all mortgage defaults – 31 percent – are of the strategic variety.
RealtyTrac reported 2 million foreclosures in September and said one in 371 housing units received a foreclosure notice.
Easy mortgages made people glorified renters rather than proud homeowners, with no emotional or financial ties.
People who made the decision to buy at the wrong time got stuck in a house that may not recover its value for 10 to 15 years.
As the housing bubble burst, real estate values plummeted and homeowners found themselves “underwater” – owing more than their homes were worth. Many with properties that are underwater decide to walk away from their loans because they can’t sell or rent the properties for enough money to cover the monthly payments.
Many believe the banking system has made the situation worse, giving people who wanted to refinance a hard time, even refusing to do anything for them at all – sometimes because the homeowners were still making payments.
But home ownership still is usually one’s biggest investment and there are indications attitudes toward mortgages are changing although foreclosures are running 65% higher than last year in the third quarter, according to RealtyTrac.
Florida is hot attraction for Middle East buyers
According to an article in GulfNews.com, Middle Eastern and African investors have spent almost $1 billion on properties in Florida in recent years.
Home price deterioration has made property purchases in Florida tourist areas more affordable to overseas property shoppers, with a median price of $219,400.
Low prices combined with the fact that Florida has historically had one of the highest in-migration rates among all the U.S. states and one of the highest population growth rates, makes it the most favored destination for foreign buyers.
Since 2007, as Florida’s real estate prices have declined significantly from their peaks, investors were able to buy developed residential land or second/investment homes around the major tourist areas for rental income.
Posted by Scott R. Lodde