New research shows the recent jump in the rate of homeownership was tied largely to loose lending. In short, after three decades of stability, the national rate of homeownership suddenly began rising in the mid-1990s, going from 64% in 1994 to 69% in 2004. But new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by looser mortgage-lending practices rather than demographic factors such as more households of home-buying age.

That raises an important question: How much of the growth in homeownership is sustainable now that lending standards have tightened? There’s no reason to expect all the gains to disappear, but some economists say the Atlanta Fed study points to more trouble ahead for the reeling housing market.

The rate of homeownership has already begun to drop. It was 68.2% in the second quarter of 2007, down a full percentage point from its peak.

Given the current number of U.S. households of 110 million, the change in the homeownership rate over the past two years has already subtracted almost 500,000 from the underlying demand for new homes.

With lending standards tightening there is a need by the buildng industry and real estate industry to become more creative and expand their thinking. The use of barter, a most versatile business tool, should be embraced. Suppliers could, for example trade a portion of their supplies for homes, which they could monitize in a variety of ways. A mature commercial barter industry could provide a major assist as well–providing contacts/suppliers/buyers and an alternative currency. Unfortunately, the industry isn’t close, at this point in time, to doing so in a major way.

This entry was posted on Wednesday, October 31st, 2007 at 7:52 am and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.