Home owner ship

Here is an article I found on MSN that talks about home ownership and how it is at it's lostest level in 19 years. The reason behidn the drop is that in a lot of areas investor have come in and bought up the investory of entry level housing. This has driven prices up and cut down on inventory available. This is good news for land lords as rental demand is high now.

The homeownership society is clearly over. Even as home prices soar and value returns to real estate, the one number that just keeps falling is the nation's homeownership rate. In the first quarter of this year, it fell below 65 percent for the first time since 1995. It now stands at 64.8 percent, according to the U.S. Census, down from a high of over 69 percent at the height of the last housing boom.

"Homeownership is one of the most important paths to the middle class for families. It's how folks put down roots, build wealth put kids through college, start businesses," said Shaun Donovan, secretary of Housing and Urban Development. "If there are people who are ready to buy a home, but who aren't getting access to credit, then we've got a problem, and that is what we are facing right now."

Donovan is looking for more swift action from lawmakers on Capitol Hill who are tackling a bill on housing-finance reform this week. That bill also, Donovan stresses, includes access to more affordable rental housing.

Home sales were higher in 2013, but that was largely because of huge demand from individual and institutional investors on the low end of the market. Using all cash, they bought up swaths of single-family homes in the most distressed markets, pushing prices higher by double digits. They didn't leave much behind for regular, credit-dependent buyers.

"This institutional investor dynamic is a whole new era I think," said Robert Shiller, creator of the S&P/Case-Shiller Home Price Indices on CNBC's "Squawk Box" on Tuesday. "As institutional investors start to play in the single-family market, that just changes it fundamentally."

Home prices were up around 13 percent in February, according to Shiller's index, despite the fact that sales have been waning since last summer, when mortgage rates jumped higher.

Investors, having priced themselves out of several formerly hot markets, are now pulling back somewhat on purchases, leaving an historically short supply of lower-priced homes for a usually strong cohort, the first-time homebuyer.

With first-time buyers priced out of some homes and facing tougher credit standards and higher down payments, homeownership had nowhere to go but down. Household formation is also anemic. Just 423,000 households were formed in the year ended on March 31, and the vast majority of those were renter households. Normal formation is usually well over a million households a year.

"Household formation is critical for the housing recovery. With so many young people living with their parents or roommates during the recession, the housing recovery now depends on how quickly young adults re-enter the housing market," said Jed Kolko, chief economist at Trulia.

Kolko says the census data may be undercounting formation, as job growth has picked up for young adults, but so many new renter households don't bode well for homeownership.

"Ironically, adding renter households could cause the homeownership rate to fall, even though these new rental households are a sign of recovery and will spur more construction starts," added Kolko.

On the plus side, the trend will favor investors in rental housing.

"The increase in the share of households renting to a 19-year high in Q1, and the low supply of homes entering the rental market, look like boons for both rental value growth and multi-family homebuilding," noted analysts at Capital Economics, who predict the homeownership rate will bottom out at 64 percent.

Home prices are beginning to moderate, as a result of slightly more inventory coming to the market and lackluster sales, but price growth is still well above income growth, never mind rising mortgage rates.

"We should look at smaller price increases therefore as a good thing, as these double-digit gains are just not sustainable and need to be priced more competitively in order to entice that family to buy their first home instead of continuing to rent it," noted analyst Peter Boockvar at the Lindsey Group.