Here is an interesting stat that came from the Federal Reserve Bank of Atlanta. Homeownership rose from 64% in 1994 to 69% in 2004. Since 2004 the rate of homeownership has declined nearly a point to 68.2%.

The combination of upward mobility and easier credit opened many doors to owning ones own home. However, back in 2004 the focus was on greater opportunity for new homebuyers, now with tighter credit many are caught in  a crunch.

Many analysts have pointed to easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy macroeconomic analysis, the authors conclude that the availability of new mortgage options accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31%. Although the paper cites lowered downpayment requirements as the biggest factor in raising ownership, co-author Carlos Garriga of the St. Louis Fed says a forthcoming paper will attribute more of the effect to “teaser” loans with low introductory payments that appeal to young and lower-income buyers. via Business Week

The homeowners on the bottom end of the rung, those that comprise the homeowners in the 64% to 68% range, are obviously the ones that have the greatest risk in homeownership. What will be interesting to see is since loose credit was a primary reason for them to become homeowners and now we are facing tighter credit again, what will the downside be to the national housing market?

And with fewer potential buyers and the speculators gone, what will the larger market use to find the bottom since there is pressure with both high inventory and more foreclosures on the horizon?

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