Updated home ownership graph

[IronWing]

The guy running the DoctorHousingBubble blog directed me to better data sources for my home ownership chart so I've updated it using the new data from the Federal Reserve's Flow of Funds reports plus the Census Bureau data I was using before. 2010 data is for Q1.

The Home Ownership Rate is published by the Census Bureau, the Equity Ownership Rate is calculated by dividing owner equity by the total value of owner-occupied real estate as listed in the Flows of Funds reports. The Owned Free and Clear rate comes from the Census Bureau. The free and clear data prior to 1985 is muddled and the footnotes in the tables aren't helpful so I've left that off the chart until I can figure out what is being reported.

The Adjusted Ownership Rate is my own creation, multiplying the nominal home ownership rate by the equity ownership rate, trying to get at what people really own. I'm thinking of dumping this line as I'm thinking it may not tell me what I thought it did.

What I found interesting is that the number of households that own their homes free and clear has remained almost constant at ~25 million since 1985 while the owner occupied housing stock has increased from 54.7 million units in 1985 to 75.6 million today and the US population has grown from 236 million to 307 million.

 

[Drako]

Ugh, so what does this graph tell us?

 

[IronWing]

Ugh, so what does this graph tell us?

Someone is having a bad hair decade, lots of someones.

 

[Zebo]

Tell us we are a massively leveraged consumption economy.

 

[Drako]

Someone is having a bad hair decade, lots of someones.

Please explain, in plain English for us simpletons if you could.

About the only thing it shows me is that the housing bubble broke.

 

[MJinZ]

As I see it:

Equity Ownership wise, it means that at 1950, 85% means that the debt to value indicates that if you owed $85 on a house, the house was worth $100.

Suddenly, in the 1990s, if you owed $25, your house was worth $100. Huge increase in market value of houses - aka Bubble.

 

[IronWing]

As I see it:

Equity Ownership wise, it means that at 1950, 85% means that the debt to value indicates that if you owed $85 on a house, the house was worth $100.

Suddenly, in the 1990s, if you owed $25, your house was worth $100. Huge increase in market value of houses - aka Bubble.

The equity ownership rate means that in 1950, 85% of the value of owner occupied housing was owned by the people living there, not the banks. By 2005, folks living in owner occupied homes only had 60% equity in their homes. By 2009, this had dropped to 39% equity with the lenders owning 61% of the home's value.

 

[MJinZ]

The equity ownership rate means that in 1950, 85% of the value of owner occupied housing was owned by the people living there, not the banks. By 2005, folks living in owner occupied homes only had 60% equity in their homes. By 2009, this had dropped to 39% equity with the lenders owning 61% of the home's value.

You said:

Equity Ownership Rate is calculated by dividing total outstanding residential mortgage debt by the total value of owner-occupied real estate

Mortgage Debt / Value of Home = How much you borrowed (and still owe the bank) as a ratio of how much the home is worth.

Unless you mean Equity in Home/Value of Home = How much you have paid off as a ratio of how much the home is worth.


The way I see makes sense, because home values steadily increased ((mortgage/value of home) decreases), until the 90s, when the % changed drastically, indicating either a huge drop in the amount people are taking out in mortgages (which doesn't really make sense, it would mean everyone is suddenly rich and doesn't need to borrow) or the value of homes suddenly jumped.

 

[Jhhnn]

superimpose this graph on the others to see what happened-

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

We got screwed by the financial elite, plain and simple. the top 400 incomes jumped up by an average of $80M+ in 2007... they jumped off the pony before it went off the cliff...

PS- the only reason equity ownership isn't through the floor is people who bought before the boom, didn't take any cashout refis...

 

[IronWing]

You said:

Equity Ownership Rate is calculated by dividing total outstanding residential mortgage debt by the total value of owner-occupied real estate

Mortgage Debt / Value of Home = How much you borrowed (and still owe the bank) as a ratio of how much the home is worth.

Unless you mean Equity in Home/Value of Home = How much you have paid off as a ratio of how much the home is worth.


The way I see makes sense, because home values steadily increased ((mortgage/value of home) decreases), until the 90s, when the % changed drastically, indicating either a huge drop in the amount people are taking out in mortgages (which doesn't really make sense, it would mean everyone is suddenly rich and doesn't need to borrow) or the value of homes suddenly jumped.

My bad. The Equity Ownership Rate is the owner equity/total value. Fixed in OP.

The downward trend in equity ownership in the 50s can be explained by the development of the mortgage market and the GI Bill. After that, explanations have to be taken with a grain of salt as a drop in the equity rate may indicate an increase in folks buying homes or it may reflect a decline in values.

The following might shed some light. This is the total value of owner occupied residences and mortgage debt outstanding over the same period. This is the raw data I used to calculate the equity ownership rate The data is not inflation adjusted. I might go back and adjust for inflation using the BLS' CPI but I'm not sure that is the right inflation factor to use in this case.

Note the loss of $6.4 trillion in market value from 2006 to 2010.

 

[IronWing]

superimpose this graph on the others to see what happened-

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

We got screwed by the financial elite, plain and simple. the top 400 incomes jumped up by an average of $80M+ in 2007... they jumped off the pony before it went off the cliff...

PS- the only reason equity ownership isn't through the floor is people who bought before the boom, didn't take any cashout refis...

For those still holding mortgages, equity ownership is even lower than the graph suggests as it includes the 33% of owner occupied homes owned free and clear. I don't have the data to pull the values of those homes out of the graph as the reports only listed number of units owned free and clear, not the value of those units.

 

[IGBT]

and where will it go when your obama ends the home mortgage deduction??

 

[IronWing]

and where will it go when your obama ends the home mortgage deduction??

I'll bet you a popsicle that the mortgage interest deduction will remain on the books throughout Obama's time in office. That being said, I think it should go away.

 

[Double Trouble]

I'll bet you a popsicle that the mortgage interest deduction will remain on the books throughout Obama's time in office. That being said, I think it should go away.

I'm sure there are politicos salivating over the amount of additional money they could waste if they were to get rid of the mortgage deduction, but the reality is that it's not going to happen. Every politician knows that's a sure-fire way to get booted out of office in a hurry.

 

[Jhhnn]

and where will it go when your obama ends the home mortgage deduction??

Dream on. That's totally contrary to what the Obama admin has done so far, which is to subsidize housing purchases.

It may be possible to cap that deduction, quite where I don't know, but trying to remove it would be political suicide. Only the most ardent whackjobs could possibly see it any differently.

Which is not to say that I favor it, because it encourages people to over-buy and builders to create oversized McMansions, or at least it has in the recent past.

 

[Strk]

Dream on. That's totally contrary to what the Obama admin has done so far, which is to subsidize housing purchases.

It may be possible to cap that deduction, quite where I don't know, but trying to remove it would be political suicide. Only the most ardent whackjobs could possibly see it any differently.

Which is not to say that I favor it, because it encourages people to over-buy and builders to create oversized McMansions, or at least it has in the recent past.

It will probably be easier for Obama to add a VAT than take that deduction away.

 

[Jhhnn]

It will probably be easier for Obama to add a VAT than take that deduction away.

Congress and the Admin would be better served, as would the nation as a whole, if top echelon taxes were raised first and foremost. VAT taxes have negligible effect on top tier incomes, and anybody with a lick of sense knows it. That's why repubs want it.

And what's being bandied around isn't so much a VAT, anyway, as a national sales tax, which is even more regressive.

 

[cubby1223]

Congress and the Admin would be better served, as would the nation as a whole, if top echelon taxes were raised first and foremost. VAT taxes have negligible effect on top tier incomes, and anybody with a lick of sense knows it. That's why repubs want it.

And what's being bandied around isn't so much a VAT, anyway, as a national sales tax, which is even more regressive.

Who do you get your info from? Or do you just go on your assumtions - anything that benefits only "the rich" must certainly be the agenda item for Republicans?

 

[IGBT]

I'll bet you a popsicle that the mortgage interest deduction will remain on the books throughout Obama's time in office. That being said, I think it should go away.

they done away with it in England. the year 2k was the last year for it. Not shure for the rest of the UK. Rumor has it the obama has already factored it's demise in future budgets ans is salivating over the "revenue enhancement".

 

[Jhhnn]

Who do you get your info from? Or do you just go on your assumtions - anything that benefits only "the rich" must certainly be the agenda item for Republicans?

I'm just going on past performance... 30 years worth...

 

[Jhhnn]

Rumor has it the obama has already factored it's demise in future budgets ans is salivating over the "revenue enhancement".

When all you've got is delusion, quote rumor... gleaned from the most whacked out right wing blogs imaginable, I'm sure...

 

[IronWing]

Here's the inflation adjusted graph for total value of owner-occupied homes and outstanding mortgage debt. This one shows the bubble in all its glory.

 

[Jhhnn]

A graph showing only the new mortgages (including refi cashouts) vs "value" from 2000 forward would show a much more radical effect- the lines would cross rather sharply, illustrating the negative equity created for those buyers, a huge number of buyers.

Few people have even the vaguest notion as to the far reaching effects of what amounts to systemic financial system fraud during the period in question. That fraud was supported, enabled, and encouraged by both the Bush Admin and the FRB, acting in concert.

Don't like that? Too bad. It's the truth, or at least part of the truth. If we're lucky, the economy will suffer in the same way as that of Japan following their real estate flimflam collapse. It'll likely be worse, because of other factors, like the fact that the Japanese still run a balance of payments surplus.

 

[JockoJohnson]

A graph showing only the new mortgages (including refi cashouts) vs "value" from 2000 forward would show a much more radical effect- the lines would cross rather sharply, illustrating the negative equity created for those buyers, a huge number of buyers.

Few people have even the vaguest notion as to the far reaching effects of what amounts to systemic financial system fraud during the period in question. That fraud was supported, enabled, and encouraged by both the Bush Admin and the FRB, acting in concert.

Don't like that? Too bad. It's the truth, or at least part of the truth. If we're lucky, the economy will suffer in the same way as that of Japan following their real estate flimflam collapse. It'll likely be worse, because of other factors, like the fact that the Japanese still run a balance of payments surplus.

So are you absolving the morons who signed the mortgages when they purchased their overpriced homes from any wrong doing?

 

[DietDrThunder]

I'll bet you a popsicle that the mortgage interest deduction will remain on the books throughout Obama's time in office. That being said, I think it should go away.

My mortgage interest rate is so low, and I owe so little on my home that I can't take this deduction every year anyway. I could pay off my home but why pay it off when I can earn more on the money than paying off the house (3.825% for 15 years and I have 7 years left until payoff). I have to pay double my property taxes one year (pay in January for current year, pay in December for next year), along with the mortgage deduction in order to itemize deductions. Then the following year I have to take the standard deduction. If the deduction went away, it would have only a slight effect, if any on my federal taxes.