Home ownership. For decades, it has been the cornerstone of the American Dream.
During and after the Great Recession, this aspect of the American Dream became unravelled as shown here:
In 2004, the home ownership rate peaked at 69 percent, up from 64 percent the decade before. In 2013, the home ownership dropped to its current level of 65.1 percent, a drop of 5.7 percent. A significant part of this drop was due to the millions of American home owners who found themselves on the receiving end of a foreclosure notification.
Some parts of the United States were hit worse than others. Let's open this section by looking at a bar graph that shows the home ownership rate for all states in 2012 in order from least to greatest:
Now, let's look at some key changes to the downside. Among the largest losing states when looking at the change in home ownership rates is Nevada where the home ownership rate dropped from 65.7 percent in both 2004 and 2006 to 56 percent in 2013, a very substantial drop of 14.8 percent:
Note that home ownership rates in Nevada are about the same level that they were in the early 1990s.
California was hard-hit as well with the home ownership rate dropped from 60.2 percent in 2006 to 54.3 percent in 2013, a drop of 9.8 percent as shown here:
You have to go all the way back to 1991 to see home ownership levels in California that are the same as they were in 2013.
Florida was another hard-hit state with the home ownership rate dropping from 72.4 percent in both 2005 and 2006 to 66.1 percent in 2013, a drop of 8.7 percent as shown here:
Here's a look at Ohio's home ownership rate which dropped from 73.3 percent in 2005 to 67.9 percent in 2013, a drop of 7.4 percent as shown here:
This drop is at least partly related to the de-industrialization of Ohio's economy since the turn of the millennium.
In contrast, despite what we hear about residential real estate problems in Detroit and other automotive rust belt cities in Michigan, Michigan's home ownership rate has remained fairly steady since 2009, falling from 77.4 percent in 2006 to its current level of 73.9 percent (still leaving it among the highest state in the nation as measured using the home ownership metric), a drop of only 4.5 percent as shown here:
Thanks to horizontal drilling and fracking, North Dakota's economy is strong. Since its peak home ownership rate of 71 percent in 2000, North Dakota's home ownership rate has fallen to 68 percent, a drop of only 4.2 percent as shown here:
Thanks again to the oil industry, Texas has had a relatively small readjustment in home ownership rates. Since peaking at 66 percent in both 2006 and 2007, the state's home ownership rate dropped to 63.3 percent in 2013, a drop of only 4.1 percent as shown here:
Lastly and because it is the nation's third most populous state, here's a graph showing the relatively small change in New York's home ownership rate which dropped from 55.9 percent in both 2005 and 2007 to 53 percent in 2013, a drop of 5.2 percent:
We can quite quickly see that home ownership rates readjusted in some U.S. states far more than others since the peak of the housing market in 2006. Those states where a real estate bubble developed and then burst (i.e. California, Nevada and Florida) saw the most significant declines in the rate of home ownership, pushing rates down to levels last seen in the 1990s. The relaxed credit standards that were used by the mortgage industry during the first half of the 2000s were largely responsible for the ramping up of the home ownership rates, particularly among households that were "credit constrained".
Is home ownership still the key to the American Dream that it was for generations? A Pew Research analysis in 2012 showed that the percentage of Americans who considered home ownership to be a key requirement for being in the middle class has dropped from 70 percent in 1991 to only 45 percent in 2012 as shown on this graph:
Interestingly, a study by Chatham House showed that states with high rates of home ownership tend to be states with high levels of unemployment as shown on this graph:
One explanation is that if workers own their home, they are less mobile when it comes to moving for work, particularly given the stubbornly weak real estate market in many parts of the nation.
It is becoming increasingly apparent that home ownership today no longer assures the owner that they are part of the American Dream and that homeownership is not the only means to both a happy and secure financial future and a strong national economy.