More families are joining ranks of homeowners

Staying Ahead

August 19, 1996|By Jane Bryant Quinn

NEW YORK -- Homeownership in America dipped in the 1980s and early 1990s but now appears to be back on a solid track up.

Last year, 1.7 million families joined the ranks of homeowners, the largest single-year increase in more than 20 years, reports the Joint Center for Housing Studies at Harvard University.

At the end of last year, 64.7 percent of Americans owned their own homes. That's still below the historical high of 65.6 percent, registered in 1980. But it's a welcome improvement from the 64 percent trough that persisted from 1987 through 1991.

The picture changes a little, however, when you analyze where the housing gains lie.

First, the recovery is largely confined to whites, who've been gaining since 1987. Hispanics showed a gain last year after a drawn-out slump. But ownership rates among African-Americans show no substantial rise, on average, since 1989. The middle classes are doing better. But homeownership has fallen sharply among the growing number of lower-income households.

Second, older people are faring the best, especially those 65 and up. Thanks to their increasing affluence, seniors' rate of homeownership rose even in the 1980s when younger people were dropping out.

For people under 25, on the other hand, homeownership declined last year, continuing a trend that has persisted for more than 20 years.

This fact doesn't discourage William Apgar, the joint center's executive director. Future surveys, he believes, will show that the drop in homeownership among the young is finally drawing to a close. He rests his case on last year's soaring rate of homeownership among people 30 to 34, a common age for married couples to buy homes.

The decline in homeownership among people under 25 may be partly voluntary, Apgar says. Young couples on average are marrying later and not having children until their late 20s or early 30s. Staying single and childless defers a home-buying decision. By the time they pass 30, today's twentysomethings might also be poring over mortgage papers.

Furthermore, houses aren't always seen as good investments any more. What could have been a down payment may now be stashed in a tax-deferred 401(k) plan.

There has been an amazing change in affordability over the past few years. The price of the median home is lower now than it was in 1989 and even in 1979, adjusted for inflation. For three straight years, mortgage rates have been at their lowest in more than 20 years. As a percentage of after-tax median income, homes on average are 33 percent cheaper than they were in 1982.

These trends are supported by a good economy, good job growth and, recently, rising real wages. Adjusted for inflation, home prices are now swinging up in most parts of the country, which may change people's minds about whether a home is a reasonable investment.

High upfront costs are a barrier to first-time buyers. But both the government and private lenders are now promoting special low down-payment programs. Many banks are targeting people they used to ignore: immigrants, minorities and lower-middle-income workers.

Most of the new mortgage money is going into the suburbs, at the cities' expense. But the smarter cities are fighting back, which is also good news for people who want to buy. There's a trend toward making it cheaper to build in cities, by changing outdated building codes and lowering fees for services such as sewer and water hookups.

For renters, however, the news isn't nearly as good. Old rental properties are deteriorating, or being taken off the market, faster than new ones are being built, Apgar says. That's keeping rents high. Almost one renter in every two pays more than 30 percent of income for housing; one renter in five pays more than 50 percent.

As a percentage of renters' income, rents have risen since 1992 and are higher today than they were in 1982. That's another thing prodding people to buy homes, if they can afford them. For those who can't, high rents are widening the gap between rich and poor.

Pub Date: 8/19/96

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