One thing just about everyone can agree on is that the biggest benefit of the housing market boom over the past several years has been the increase in the homeownership rate, in the United States.

After decades of relative stability, the rate of U.S. homeownership began to surge in the mid-1990s, rising from 64% in 1994 to a peak of 69% in 2004, near which it has hovered ever since; this translates into 12 million more homeowners over the period (Figure 1).

Understanding the forces behind such trends in homeownership is important not only because supporting homeownership has been an unequivocal public policy goal for decades but also because homes are an important part of people’s net worth and, therefore, can affect their spending, working, and saving decisions.

What caused the increase?

According to Jonathan Miller: The causes of the increase seem to be attributable to a shift in demographics that is favorable to housing and creative financing options favorable to home purchasers.

Of course, a cynic would say, homeownership has increased, but at what cost? Did some people borrow too much, and/or did they borrow using interest-only or option ARMs? Did they get taken by subprime lenders? Will any of this lead to huge increases in foreclosure rates?

I don’t think so.

I think a beautiful thing has happened. It’s awesome.

Source: The Rise In Homeownership, the Federal Reserve Bank of San Francisco, by way of Jonathan J Miller, Matrix

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