From the Harvard Joint Center for Housing Studies' Jon Spader, a scholarly look at the effect foreclosures have on declining home ownership rates:
The U.S. homeownership rate declined to 63.5 percent in the first quarter of 2016, a drop of 0.3 percent from the prior quarter and 5.5 percent from its peak in 2004, according to the new homeownership rate figures released in April. [Figure 1]. This decline also appears in the seasonally-adjusted measure—which shows a decline of 0.1 percent—and follows two quarters of gains.
A natural question following this recent volatility is whether the recent downtick is the beginning of a further slide, or whether the volatility over the previous four quarters is a sign that the homeownership rate is finally levelling off. However, a comprehensive answer to these questions is beyond the scope of this blog post, other than to say that existing projections vary—for example, see Myers and Lee (2015), Urban Institute (2015), Mortgage Bankers Association (2015).
Instead, this blog post focuses on the contribution of foreclosures to the decade-long decline in the homeownership rate, assessing the extent to which slowing foreclosures may ease downward pressure on the homeownership rate.