American Home Ownership Drops to Its Lowest Level in 46 Years

Many experts believe that the United States is fast becoming a nation of renters. Home ownership, once a source of national pride, is on the decline. The percentage of Americans who own a home has hit its lowest level since 1965 according to a recent report from Morgan Stanley.

While the U.S. Census Bureau data showed that the percentage of people who owned a home had dropped to its lowest level since the first quarter of 1998, 65.9% from 69.2% in late 2004, the Census Bureau's statistics do not factor in mortgage delinquencies.

According to economic analysts at Morgan Stanley, the foreclosure crisis continues to wreak havoc on the housing market. Their report shows a much lower percentage of home ownership, in fact dropping to the lowest level since 1965 when the U.S. Census Bureau started keeping quarterly records.

The Morgan Stanley report argued that when factoring in the number of delinquent mortgage borrowers who are no longer making their mortgage payments, but who still occupy their homes and are still technically considered homeowners, the actual home ownership rate is 59.2%.

Another reason given for the decline in home ownership is that many people who would like to buy a home are unable to qualify for a mortgage loan. Government-supported organizations, like Fannie Mae and Freddie Mac, along with loans from the Federal Housing Authority, account for about 90% of all mortgage lending today. Fannie and Freddie have tightened their underwriting standards and the private mortgage market has dried up.

“The combination of falling home prices, limited mortgage credit, continued liquidations, and better rental options is fundamentally changing the way Americans live,” said the analysts, "We believe this change is only beginning and is moving the country towards becoming a rentership society."

Analysts said "For the first time in recent history, the government is no longer promoting home ownership for all Americans, leading to a reconsideration of housing-related public policy."

Supporting this theory the government’s February housing finance report said its goal was to "ensure that Americans have access to an adequate range of affordable housing options. This does not mean our goal is for all Americans to be homeowners."

On the other hand, some housing experts believe home ownership is still the preferred choice for most Americans and don’t believe home ownership will fall much further below current levels. With home prices down 32% since they peaked in mid 2006 and mortgage interest rates near or at historic lows, some housing analysts think it will be hard for potential home buyers to resist taking advantage of such favorable home buying opportunities.