By Oregon Tax News,
Reaching the lowest point in 17 years, homeownership dropped to a seasonally adjusted 65.2 percent in the first quarter as more people chose to rent instead of purchase a home. The rate of homeownership peaked at 69.4 percent in 2004, and has followed a downward trend since the collapse of the housing bubble.
The recession of 2007-2009 and anemic recovery, now in its fourth year, have not been beneficial for a rebound in homeownership. Unemployment is at 7.6 percent, with 21.6 million people either unemployed, working part-time while desiring full-time employment or wanting a job, but have given up looking.
Since rental homes continue to be in demand, investors are taking advantage of the situation and buying up homes for rentals. The National Association of Realtors® reports: For-sale inventories are most constrained on the low-end of the housing market, where investors had moved in floods to purchase distressed homes and hold them as single-family rentals, housing experts note.
Besides diminishing supply, that demand has also sent home prices higher, recording their largest gain in February in almost seven years. Zillow researchers have determined that low mortgage interest rates make homes seem affordable. But low rates mask the fact that actual home prices are significantly more expensive when compared to historic norms with regard to annual incomes.
According to Zillow, metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose(52.1 percent more), Los Angeles(48.8 percent more), Portland, OR, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more). Portland home prices on average were 4.1 times the median annual income by the end of 2012. The average price of a home from 1985-1999 was 2.8 times the median annual income.
Since incomes have not kept pace with the rise in home prices, affordability may dry up when interest rates rise.