A new analysis of the impact of pent-up demand for homes that has been deferred by the housing crisis and recession could increase the homeownership rate by nearly 2 percent.
Selma Hepp, senior economist at the California Association of Realtors, estimates that economic factors, not slowing population, have restricted household formation in California by 575,000 and 696,000 additional households. With owner-occupied comprising on average 58 percent of households, that means California has between 333,000 and 403,000 fewer owner-occupied homes today.
Additional, some 100,000 potential more home-owners are currently renters and would by homes if they could, she argues in a post today on the Realtor.org site.
“Lastly, there are those unfortunate homeowners who are currently in a home but would prefer to sell their current home and buy another one. It is difficult to say just how many homeowners are in this situation. Over 30 percent, or over 2 million, of California’s mortgages are under water. Not all of these homeowners would necessarily move, but it is safe to assume that many would. While both of these groups add to the pent-up demand, they are not newly created households and they would add to housing supply as well as housing demand,” she wrote.
The share of owner-occupied units in California fell by about 2.75 percent from the peak, and the average for the last decade is at 58 percent. While it is difficult to say that homeownership rate should be and what rate it is going to settle at, if it moves from the current 56.2 percent to the average rate (58 percent) in California, she said.
“All things considered, this analysis illustrates the terminating effect the Great Recession has had on the housing demand. And while the uncertainty over foreclosure crisis and economic improvement still lingers, the size of pent-up demand implies that recovery of the housing market could quickly follow any economic recovery,” said Dr. Hepp.
Should her analysis hold true for the nation as a whole, the national homeownership rate, currently at 65.5 percent, would rise to 67.2 percent solely on the strength of demand that has been delayed by the economy and the housing crisis. The national homeownership rate last reached 67.2 in the fourth quarter of 2009.