An important public policy has been to promote home ownership. As we can see from this chart, a steady decline in home mortgage rates and looser underwriting standards helped drive the homeownership rate from 64% in 1994 to a high of 69% in 2004. Of course, this set up the 2008 housing crash when investors in the massive mortgage bond market realized the shaky foundation of their collateral. After the banks and mortgage investors found religion, home ownership bottomed at 63% in 2016 before starting its rebound. 2020 covid lockdowns helped accelerate this rebound as renters decided it was better to be confined to a home they own rather than a tiny apartment. Now that we see mortgage rates ramping up to levels last seen in 2007 before the Great Recession, homeownership rates are back down to 66% (trending in the wrong direction). While home ownership is a very important social objective for obvious reasons, the key is to achieve this by consistently maintaining low mortgage rates while also helping to strengthen consumer finances to achieve this end. If we do this, then those in the lower-income demo that want out of the rent trap don’t have to rely on loose underwriting standards (that always leads to calamity) to pursue the American Dream.
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