Fed Study Finds ‘Real’ Homeownership Rate

The Wall Street Journal has a blog article discussing a federal study on U.S. Homeownership rates:

The U.S. homeownership rate, already down two percentage points from its 2006 peak of 69%, could fall by another five percentage points over the coming years to levels last seen in the mid-1990s, says a staff report from the Federal Reserve Bank of New York.

The study looks at the number of homeowners who are underwater, owing more than their homes are worth, and excludes them from the official homeownership rate calculated every quarter by the Census Bureau.

While the official figure stood at 67.2% at the end of last year, the authors produce their own estimate of an “effective” homeownership rate. The difference between the official and effective homeownership rates, or what the authors dub the “homeownership gap,” is around 5.6 percentage points for the nation as a whole, which means the effective rate of homeownership is closer to 62%.

That homeownership gap is much bigger in cities that have seen big home-price declines. In Las Vegas, for example, the gap stands at more than 40 percentage points. So while Sin City’s official homeownership rate stood at 58.6% as of August 2009, the effective homeownership rate was closer to a paltry 14.7%. (That estimate uses the Case-Shiller home-price index to predict the number of underwater borrowers; estimates from the Federal Housing Finance Agency’s price index, which have less-severe price declines, produces an effective rate of 19.3%.)…

Please go to The Wall Street Journal’s website to read their article further.

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