Homeownership Hits Highest Level in 14 Years

Homeownership in the United States climbed in 1995 to its highest level in 14 years, an improvement that Federal Reserve Board Chairman Alan Greenspan said reflects steady economic policies and low inflation.

The Department of Housing and Urban Development released statistics Thursday showing that 1.4 million Americans became homeowners last year, pushing the national ownership rate to 65.1% in the final three months of the year. That’s the highest level since 1981.

The rate was 64.2% in the final quarter of 1994; the year-over-year rise of 0.9 percentage point was the biggest increase in three decades, HUD Secretary Henry Cisneros said. The improvement indicates “a strong economy and the desire for families to invest their hard-earned money in a home,” he said.

Cisneros said gains were also reported among groups that traditionally lag in homeownership. The rate for minorities rose to 44.3%, up from 43.7%, and for households with incomes of $39,000 or less it rose to 49.4% from 48.6%.

The U.S. homeownership rate peaked at 65.5% in 1980, then began a decade-long slide as baby boomers were battered by rising house prices and mortgage rates pushed up by a Fed trying to overcome high inflation.

Greenspan said the central bank’s success in lowering inflation is a key factor spurring current high levels of homeownership. The government reported last week that consumer prices rose just 2.5% in 1995. It was the smallest advance since 1986 and the first time since the mid-1960s that inflation has been under 4% for four consecutive years.

“It is no coincidence that this good time for housing has come when inflation has been moderate and income growth has been reasonably steady,” Greenspan said. “These are precisely the conditions that promote housing affordability, consumer confidence and healthy lending institutions.”

Greenspan said that because of these favorable trends, the percentage of monthly income that a typical household devotes to mortgage payments on a new home is at its lowest level in 20 years.

While housing accounts for only 4% of the economy, Greenspan said, it has accounted for 20% of growth since the last recession. He forecast continued gains in coming years as new immigrants and Generation X, the group after the baby boomers, boost demand.