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The number of people who own a home continues to fall

(Federal Reserve Bank of St. Louis)

Home ownership rates across the country continue to decline and an economist at the St. Louis Federal Reserve says there are two potential factors at play. Bill Emmons points to a potential new-normal scenario and the possibility that housing ownership remains in downward cycle that has lasted for roughly two-decades.

“There is nothing that guarantees we’ll go back to just the way things were before, either 10 years ago before the financial crisis, or even I would go back 20 years ago in the mid-1990s,” Emmons tells St. Louis Public Radio.

The St. Louis Fed says the national ownership rate has fallen for the 11th straight year. It stands at 63.7 percent, compared to a peak of 69 percent in 2004. The rate is at its lowest point since 1968, even with historically-low mortgage rates and more people finding jobs.

The downward trend could be a sign that the rate is still returning to normal, according to Emmons.

“Most people probably would have thought it would be over by now, because the recession has ended, the financial crisis has ended. We've have some economic recovery, but the housing cycle seems to still have not quite reached its end."

The other possibility is that more people are retreating from getting a mortgage and ownership levels might not return to the levels surrounding the late-90s, early 2000s housing boom.

Emmons says that might be especially true for some segments of the population.

“Young people, people with less education, African Americans and Latinos experienced a bigger boom-and-bust cycle than the general population. So, it's possible that home ownership rates for those groups in particular just won't be as high as they were before.”

Emmons suggests it could be time to examine public policy priorities, specifically making policy more neutral between owning and renting.

Credit (Federal Reserve Bank of St. Louis)
Bill Emmons is an economist and assistant vice-president at the Federal Reserve of St. Louis.

“Because we now, I think, we probably have a little bit of a skew toward home ownership,” says Emmons.

“And of course a lot of those incentives are not particularly effective for the groups I’m talking about, the more vulnerable groups.”

He says many of the benefits through the tax system are more beneficial to higher-income families. Emmons adds that ownership is right for some people and renting is a better fit for others.

“So all of the supports, I think, should make it easier for people to make the decision that’s right for them.”

Wayne Pratt is the Broadcast Operations Manager and former morning newscaster at St. Louis Public Radio.