Viewpoints Housing Finance Reform: First Things First Why is the U.S. housing sector diminishing when demand for housing remains robust?
Housing finance matters. As of the fourth quarter of 2016, there was $22.7 trillion in housing in the United States, financed by $10.3 trillion in mortgage debt and $12.4 trillion in owner equity, making housing the single largest asset for most American families. Accordingly, the housing sector is a critical component of the U.S. economy and an important engine for domestic economic growth: In 2016, the housing sector – comprised of housing services and residential investment – contributed 15.6% to U.S. gross domestic product (GDP), and the homeownership rate in the U.S. was 63.6% in the first quarter of 2017. Yet, while housing remains an important part of the economy, its significance has shrunk relative to other periods. This is the case when compared to the housing heyday of 2005–2006, when seemingly limitless credit expansion led to significant housing-sector growth, with housing contributing 18.6% to GDP and the homeownership rate rising to nearly 70%. But it is also the case versus the earlier stable and sober period of 1980–2000, when housing contributed around 18.3% to GDP and the homeownership rate ranged between 64.4% (1980) and 66.2% (2000). Today, the housing sector is smaller even though demand continues to be strong: According to the Survey of Consumer Expectations Housing Survey published in June 2017 by the Federal Reserve Bank of New York, 72.2% of those surveyed preferred (22.9%) or strongly preferred (49.3%) owning versus renting. To Read the Full Article Log In Or Register
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