The lasting benefits of the housing boom

One thing just about everyone can agree on is that the biggest benefit of the housing market boom over the past several years has been the increase in the homeownership rate, in the United States.

After decades of relative stability, the rate of U.S. homeownership began to surge in the mid-1990s, rising from 64% in 1994 to a peak of 69% in 2004, near which it has hovered ever since; this translates into 12 million more homeowners over the period (Figure 1). Understanding the forces behind such trends in homeownership is important not only because supporting homeownership has been an unequivocal public policy goal for decades but also because homes are an important part of people's net worth and, therefore, can affect their spending, working, and saving decisions.



The homeownership rate in the United States increased steadily and sharply from 1994 to 2004. A portion of the increase may be due to the aging of the population, but increases in homeownership rates are widespread across many demographic groups, so one must look beyond demographic trends to explain the increase. As this Blog has suggested before, some of the explanation likely stems from innovations in the mortgage market that resulted in greater access to credit, lower down payment requirements, and easy and low-cost access to the equity in a house, which makes homeownership more attractive.