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Do Loose Lending Practices Reduce True Home Ownership?

How does one measure home ownership? Does it mean having title to a home? If so, nearly seven in ten Americans "own" a home. Or does it mean having equity in a home? In that case, a much smaller percentage own a home.

Successive administrations, Republican as well as Democrat, have sought to allow more Americans to own their homes, through lender aid, if necessary.  In the past twenty years, it has raised the nominal home ownership rate from about 63% to 69%. That's not a huge number, but it's around a 10% increase.

Problem is, most of this increase stemmed from a loosening of lending requirements; low or no down payments, no income verification, etc. In the extreme form, loans became based on "NINJA" (no income, job, or assets).

Such a model could work only if house prices went straight up. But after a prolonged period of appreciation, they failed to do so by 2007, because pulling in progressively less qualifed buyers worked like a Ponzi scheme.  When prices went down, low down payment homes went "upside down," meaning that mortgages were under water.

These now represent approximately 20% of all homes. Can such titleholders be said to own their own homes? It's more like a call option on a home. But when they can't make payments on their homes, they have every incentive to walk away. In this regard, 20% of the 70% "homeowners" or 14% of the total population  are not true home owners, meaning that only 55% are. In the earlier period (before loose lending practices),  maybe 60% out of the 63% of the population that were home owners were true home owners, meaning that the true owning population has DECLINED.

There probably have been a handful of people that have taken "loose" credit that they could not otherwise have gotten, handled it responsibly, and now own their homes free and clear, or at least have a shot at doing so. Unfortunately, for every one of these, there may have been five or ten people who used loose credit irresponsibly, and stand to lose both their homes AND their credit as a result. Netting the two groups of people represents a net loss to society.