The Homeownership Bubble - An Economic Crisis Explained
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I continue to be mesmerized by analysis of U.S. Homeownership Rates. The data clearly:
- Establishes when the Housing Bubble began
- Reveals a point of origination where a reasonable person would begin to search for an explanation for the spike in homeownership
- Highlights how dramatic the inflection point was
- Demonstrates the extraordinarily steep slope of those gains
- Documents homeownership rates establishing a U.S. record of 66.0% in 3Q97
- Provides an understanding as to why housing prices began to rise at an unsustainable pace in 1997
- Contrasts the U.S. economy's supportable homeownership range of 63.5% - 65.0% with the Housing Bubble peak of 69.2%
The data also provides insight into where we are in the downturn and a perspective on when it is likely to end.
Historically the U.S. economy has supported a structurally sustainable Homeownership range of 63.5% to 65.0%. The current ownership rate is 67.3%. Due to a reversion to pre-bubble market conditions, that rate will fall at minimum to 65%. Based on an understanding of the Boom-Bust cycle dynamic, I continue to believe that Homeownership Rates will decline to below 64% over the next several years to devastating effect.