You bring up an important point. For decades, the homeownership rate has stood at 65%. With lax lending, where everyone except an insolvent arsonist qualified for a morgage (I read that somewhere yesterday), we’ve raised the homeownership rate to almost 70%.
What surprises me is that with the lowest interest rates and loosest lending standards since the Great Depression, our homeownership rate is not higher.
Nonetheless, what should trouble us all is the creditworthiness of the new group of homeowners. There’s a reason that they couldn’t qualify before. The data clearly show that the greatest risk of default occurs in the first 3 years of a loan. This new group of homeowners is still in that risky period. They not only have a financial responsibility they probably cannot handle, but they also are in for a surprise when their exotic loan adjusts.
If 5/70 (the people between 65% and 70%) people are in this new group, that would be 7%. Does it seem reasonable that 7% of people will default simply because they are not creditworthy, and should not have been given loans to begin with?
