Maybe falling homeownership isn't so bad

It's now at an 18-year low, reversing President George W. Bush's push to boost 'the American Dream.' Too bad it was a nightmare for millions of people.

By Aimee Picchi Jul 30, 2013 1:31PM

Aerial photo of a neighborhood (© Nancy Nehring, Photodisc, Getty Images)When former President George W. Bush was in the White House, he pushed homeownership to Americans, noting that "part of economic security is owning your own home."

While his economic policies helped boost homeownership to a record high of 69.2% in 2004, many people also pointed to the push as feeding the housing bubble.

That's one reason the dip in homeownership, which is approaching an 18-year low, might not be such a bad trend. Homeownership in the second quarter stood near 65%, the lowest since 1995, Reuters reports, citing data from the Commerce Department.

Yet some people in the housing industry are pushing for new mortgage standards that may broaden the pool of potential homeowners, Bloomberg reports.

Regulators are preparing a weaker version of a proposal that would require mortgage lenders to maintain a financial interest in risky loans, Bloomberg notes. That's something the National Association of Realtors supports, telling the publication the plan would "benefit the American people by ensuring access to safe, affordable options for buying a home."

The regulation in question would apply to the Qualified Residential Mortgage Rule, which included an earlier proposal that would have required banks to keep a stake in mortgages issued to homeowners who spend more than 36% of their income on debt and invested a smaller than 20% down payment, Bloomberg notes. The less stringent proposal would change that to borrowers spending 43% of their income on debt. 

"Low-down-payment loans coupled with exotic adjustable rate mortgages helped fuel a massive housing bubble, which ultimately burst and took down the financial sector," George Mason University professor Anthony Sanders told the news service. "So the question now is do we want to do this again."

While it's not clear whether the proposal for the QRM would boost homeownership among people who are unable to support the costs of a home, the fact is that buying a house can reduce an individual's financial flexibility. For many folks, that's not always the right decision.

The "cult" of homeownership is "dangerous and damaging," Adam Posen argued Friday in the Financial Times. Posen, the president of the Peterson Institute for International Economics, wrote that economic policies create incentives for "middle-class households to leverage the bulk of their savings into a highly volatile, difficult to price asset."

Still, with mortgage rates rising and U.S. home prices spiking 12.2% in May, many renters may simply find themselves unable to buy, regardless of whether mortgage standards are relaxed. 

Follow Aimee Picchi on Twitter at @aimeepicchi.

More on moneyNOW

Jul 30, 2013 2:07PM
It's interesting that this article uses Bush as the cause of the housing bubble.  It is true that he tried to help people achieve the "American Dream", but it was actually the policies of Clinton that caused the bubble.  Clinton forced banks and mortgage lenders to loan money for housing to people that didn't have the means to pay for it.  Clinton forced this non profiling or what he said was "eliminating the discrimination practices" of the banks that ultimately put us in the position we are still in.  Bush actually tried to "reel in" Barney Frank and Fannie Mae and Freddie Mac, but was held off by Democrats that accused him of discimination.  Get the facts straight before writing articles in the future.  Try something new, actually report the facts instead of your political agenda!
Jul 30, 2013 2:21PM
Some people just aren't in a position to be homeowners - probably more than we are willing to admit.  We need to stop acting like people who rent are throwing money away - many times they aren't.  If you're only going to live in a place for 5 years, you'd probably be better off renting.  If you don't want any of the headaches that go along with maintenance, repairs and upkeep, and can't do many of those things yourself, you'd probably be better off renting.  If you aren't in a stable, long term committed relationship, the last thing you should do is go buy a house together.  If your job or income isn't stable, you should rent.  If you can't afford to put 20% down, you probably shouldn't buy.  If you are middle class and like to live higher on the hog with nicer cars, more vacations, all the latest gadgets, a nicer wardrobe and go out to eat 5 nights a week, you'd probably be better off renting.  If you are carrying credit card debt, pay that off first before you buy.  If you aren't in a position to shell out a couple of thousand bucks every couple of years to fix a plumbing problem or repair the roof or you can't absorb a huge property tax hike, you should probably be renting.

Jul 30, 2013 3:03PM

The National Association of Realtors has their part in the bubble.. and of course they would want to support anything that would make it easier for them to sell homes.  THEY DONT CARE if someone can afford the home and ends up in foreclosure, their realtors get there cut regardless.  If it goes into foreclosure, just another chance for them to make a buck.

Jul 30, 2013 3:33PM
ameriicans buying houses when their real incomes are dropping isnt a good idea-both then and now
Jul 30, 2013 3:26PM
V-L blew any semblance of reasonableness with his last sentence today.  And speaking about blowing, I see Aimee is right there after taking care of the MSNBC staff, trying in vain to blame Bush again and advance the sicko liberal agenda.
Jul 30, 2013 2:56PM

This QRM is the dumbest thing I ever heard of. The banks ALREADY have a stake I the mortgage -it's called the DEED! If the bank loans $200K for a property later worth $180K and the mortgagee defauts -the bank realizes it's stake by getting an undervalued, often vandalized piece of property back.


 Under the Obama administration, we have been trying to pass ALL of the responsibility onto the bank (or US taxpayers) and NONE onto the homeowner that bit off more than he could chew.

Jul 30, 2013 3:17PM
What happened to buy only what you can afford?  Or is it shop until you drop?  Wait, I hear that blue light special going off.
Jul 30, 2013 3:43PM

Buying a home is a good if you can afford it without being in the financial bind.

The equity builds, fix  the house to suit your taste, leave it to children or sell it and buy

condo in old age.

You can rent for 10 years, pack and leave and there is nothing to show for it.

As an example if the rent is $1,500/month,the total payment over 10 year period

( assuming no rent hikes) will be $180,000. You move out, there is nothing to show for

this large amount of money paid. With equity build up, there is money for down payment

for a larger or nicer house.

There is no tax deduction for rent as our laws favor ownership.You can't fix it to your liking.

Rent goes up every year.

Jul 30, 2013 4:30PM
I see that V-L continues his subversive spiel so i'll respond in kind.  for once, I'll agree with Aimee the headcase (and we know what head we are talking about here), reduced home ownership is a good thing. I guess she agrees with the assertion by some people that the target group the American Community Reinvestment Act and the American Dream Act were people who I am sure she would not want living next door to her or even in the same neighborhood as her.  Why else would she say that?  How do you like your own words trwisted on you in the same way you liverals twist the words of people who work for a living?
Jul 30, 2013 4:59PM
I can still remember the 4 page 2006 or 07 or 08 article in the Orlando Sentinel praising Barney Frank for enabling a couple of 50ish single women.....each was making $25-29K a year, each had less than $4K for a down payment, and both of them bought houses in the $275K range. Neither my dumb wife nor even dumber me could figure out how either would ever be able to cover just the taxes and insurance and utilities and maintenance (at least $600/mo.), let alone make a mortgage payment !!!
Jul 30, 2013 2:08PM

I think we should give credit where it is really due....


Jul 30, 2013 4:36PM

Bill Clinton still stands as my favorite President but the fact is financial de-regulation grabbed footing in 1998 with the repeal of Glass-Steagall among other Great Depression era rules that got wiped out from 1997-1999.  This all led to financial institutions that were too big to fail.  Oh, and the same lawmakers(Dodd-Frank) were at wheel during this time too but somehow were smart enough to not simply reinstate those old laws but rather re-write the entire freakin rule book.

Jul 30, 2013 5:23PM
The fact that she skipped "Everyone Should Own a Home" and went directly to Bush is just being blatantly biased. I think she needs to find a different hobby.
Jul 30, 2013 4:08PM
Jul 30, 2013 4:24PM
Lets get a few things strait here on this board ! #1 Banks were making loans for 125% of the price of the house ! Barney Frank and the MACs did not force a single bank to make a $200.000 Mortgage to a $8.00 an hr wal-mart worker ! < Fact ! #2 You had people making mortgages sitting at Starbucks sipping coffee ! , DUH .Sound lending principals was 20% down and a job to pay for the mortgage! < They lost that practice ! #3 Most of the mortgages banks were making had PMI insurance backed by the MACs.. WHY????? Once more no sound lending principals ! Banks had no fear because the US Tax payer was insuring the loans . <<< Only in the USA can this be done ! People better understand that 20% down , 5-7 % Int rate , The pymt did not excide one paycheck in a month is the norm for a 30 yr fixed rate mortgage ! That's the way it was and should be now ! That's sound lending principals that does not burn true homeowners who did everything right and still lost 50% of my homes value because of these useless wall street banks who did the stupid crap they did of the so called housing bubble !!!
Jul 30, 2013 3:18PM
Only in economics can the cause of a problem and its solution be the same thing.
Jul 30, 2013 4:06PM
Gee,  doesn't that depend on whether you-re buying or selling - -  to talk of George Bush after the FORESLOSURES ???   
home ownership is good because if housing is priced fairly then in ten years it is cheaper than rent and in twenty years it's a lot cheaper than rent.
Jul 31, 2013 9:55AM
Another bubble in the making... The rise in home prices are due largely in part to artificially low interest rates, coupled with dollar devaluation, not some magic of the Federal Reserve. It's unsustainable and won't last. They just traded easy credit for lower rates, in order to entice buyers this time around. The end result will be the same, artificially inflated prices, supply outpacing demand. 
Jul 30, 2013 3:34PM

Strange this article could be a little hard to comment on;

Also how some Bush lickers...Will come out of the blocks defending..

Really that part seem to be more about the Financial World and how it fell apart by not letting the Regulators do what they were supposed to do...And no doubt tighter controls should have been in place on Mortgage Lending.

Many shyster Realtors and Banksters in on the deals, allowing it to run amok.

And then on top of all, buyers way over extending themselves on euphoria.


Putting blame on the Bushes, Clintons or Obamas of the World, may only be a scapegoat and somewhat lame..

This has been a drive since WW2 or Korea to help build a Middle Class and wealth in America..

Situations arose in the 50s, 70s and 90s-2000s and in this last particular instance, it caught up with us big time...And was a contributing factor in bringing everything else down with it.

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