2011 Q3 Report

The nation’s housing crisis has forced unprecedented numbers of homeowners out of their homes, made for a difficult home buying environment, and tainted many Americans’ ideal of owning a home. These factors are taking their toll on homeownership in this country.

The Census Bureau says homeownership in the United States has fallen to its lowest level in more than 13 years. The nation’s homeownership rate dropped to 65.9 percent in the second quarter. That’s a full percentage point lower than the second quarter of 2010 and a half a percentage point below the rate recorded in the first quarter of 2011.


Paul Dales, senior U.S. economist with the research firm Capital Economics says the increase in the homeownership rate seen during the housing boom has been more than completely wiped out by the bust.



And the decline is not even over yet, according to Dales. He says the poor economic climate, the double dip in house prices, the high number of foreclosures, and tight credit conditions are all reasons why the home ownership rate will continue to fall.


“With another 3 million foreclosures in the pipeline and no sign of a major improvement in credit conditions or the labor market, demand for owner-occupied housing is likely to remain weak for some years yet,” Dales said. The flipside will be a further surge in demand for rented accommodations, Dales notes, which will boost rental rates and bodes well for the multi-family sector, in particular.

In line with the steep declines seen in homeownership, the share of all households renting increased to a new 13-year high of 34.1 percent in the second quarter, Dales explained. That’s up from 33.6 percent in the first quarter.

The rental vacancy rate has fallen to 9.7 percent from a peak of 11.1 percent in 2009, which has driven a recovery in rent prices. Dales says investors in the residential rental market could see rental yields of more than 5 percent over the next few years. Data from the Census Bureau also showed that the homeowner vacancy declined from 2.6 percent in the first quarter to 2.5 percent in the second.

Still, Dales notes that the numbers reflect there are 1.9 million homes up for sale that are still sitting empty. He says another 3.9 million homes are empty but, for one reason or another, are being held off the market.  The excess supply of housing remains high, and Dales stressed that the combination of weak demand and high supply almost certainly will not translate into higher house prices any time soon.



What many consider to be a staple of American homeownership is expected to be on the chopping block as lawmakers in Washington look to trim the nation’s deficit. The prized mortgage interest tax deduction has been part of the federal tax code since 1913. Currently, it costs the U.S. Treasury an estimated $94 billion a year. Under existing tax rules, homeowners may deduct the interest accumulated on up to $1 million of their mortgage debt and up to $100,000 of home equity loan debt. Mortgages on both primary residences and second homes qualify for the deduction.

Congress has tossed around several proposals for amending this part of the federal tax code, including lowering the debt limit from $1 million to $500,000 on first mortgages. According to an analysis from many agencies, a reduction in the principal balance of deductible mortgage debt to $500,000 would raise only $5 billion per year for the IRS. Economist William Wheaton at MIT has a higher estimate for the savings. He told CNBC’s Diana Olick that cutting the debt cap in half would return $15 billion a year. Lawmakers are also considering eliminating the deduction altogether for second homes and this move would bring in another $15 billion for the government.

A separate scenario that was proposed by President Obama’s hand-picked deficit commission would replace the deduction with a 12 percent tax credit, which would also have a $500,000 principal cap.



Good News for people looking for a job and others who want to work from home

CNN just reported that the FCC says that call centers are poised to add 100,000 new jobs to the economy. You’ll get your very own cubicle! Or, at least, your very own partition. The call centers jobs are coming about as some companies decide to stop outsourcing their customer service overseas and start “onshoring” it instead. A business group calling itself “Jobs4America” is announcing the project alongside the FCC. Some of the jobs will be in call center facilities, others will be “home-sourced,” which means the workers will work at computers and with headsets in their own homes.

The group has said their plan is to “target areas with high unemployment.” This is a very good strategy because with the high turnover and burnout rates seen among call center workers, you need to have nice big pools of people who have few other choices to churn through.


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