Oct. 26 (Bloomberg) -- Homeownership in the U.S. dropped for a fourth consecutive quarter, the longest decline since at least 1981, suggesting more Americans will miss their best chance of building wealth.
The proportion of households that own their residences fell to 68.1 percent in the July-September period from 68.3 percent in the prior three months, according to a report today from the Census Bureau in Washington, whose comparable records go back to 1981. The rate has been declining from a peak in 2004, which culminated a decade of gains fueled by easier lending standards and rising home purchases by immigrants and younger households.
``Owning a home in this country has been a principal source of wealth creation for low- and moderate-income people,'' said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. ``In the absence of home equity, families will inevitably spend less.''
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The Census Bureau report also found that a record 17.9 million U.S. homes stood empty in the third quarter as lenders took possession of a growing number of properties in foreclosure.
The figure is a 7.8 percent gain from a year ago, when 16.6 million properties were vacant, the Census Bureau said. About 2.07 million empty homes were for sale, compared with 1.94 million a year earlier, the report said.
Slowing residential construction has detracted from growth in gross domestic product for the last six quarters through June, shaving as much as 1.3 percentage point off growth in the third quarter of 2006, when the overall economy grew at just a 1.1 percent pace. Most economists forecast an extended construction drag on growth after credit tightened further in August amid subprime-market turmoil.
``If homeownership declines significantly, the implications for new-home sales could be dramatic,'' said Hatzius. With further weakness in sales, ``the drag from new-home building on GDP growth will last longer than most people have in their forecasts, perhaps, if things go badly, into 2009.''
Read this sentence again--The Census Bureau report also found that a record 17.9 million U.S. homes stood empty in the third quarter as lenders took possession of a growing number of properties in foreclosure. Is it any wonder that U.S. home ownership has had its longest slide since 1981? Subprime and predatory lending certainly fueled the increased demand in housing, and the rise in prices. The problem is that this speculation can only go so far--what goes boom, can certainly go bust. And with the increase in interest rates on the adjustable rate mortgages, those new American homeowners discovered they could not keep up with their increased mortgage payments, thus have been forced to foreclose on their homes. Banks are now stuck with a glut of empty homes on the market, where their values have been dropping below what the banks have lent out for mortgages--look at how the bank and mortgage companies are reporting big loses. Countrywide Financial reported a $1.2 billion dollar loss. Merrill Lynch reported a $7.9 billion dollar write-down. Washington Mutual reported its third-quarter profit shrank by 72 percent, and Citygroup suffered a 57 percent drop in third quarter profits as they took a $3 billion hit in losses. All of these loses are the result of the mortgage mess. And we're still not out of this housing mess.
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