Market Snapshot

Homeownership: Making Forward Progress in the Short Run

Following the Great Recession, homeownership in California is down. After peaking at more than 60%
at the height of the last cycle, it now sits below 55%. Notably, the Census Bureau estimates that
Los Angeles and Orange County have dipped below 50% homeownership, meaning that it’s a
majority-renter region now.

Much of the decline is cyclical: many homeowners lost their previous home to short sale or
foreclosure during the downturn. However, there is also a structural component to homeownership, as
evidenced by a particularly low homeownership rate amongst minorities. This will have an increasing
impact on overall homeownership as California becomes more diverse. This is a long- term challenge,
but also a potential opportunity for the housing market and the California economy over the short

Currently, there are over 1 million households that earn more than the minimum qualifying income,
yet continue to rent. Even without addressing the larger structural issues, simply getting more of
the income-qualified households into homes would largely erase California’s gap with the rest of
the U.S.—boosting ownership to more than 60% again. The effects would be especially important for
Hispanic and black households. For example, roughly 277,000 additional Hispanic renters who earn
enough to purchase the median priced home in their county would be enough to push Hispanic
homeownership to almost 50%. Black households would see homeownership rise from the low 30s to more
than 40% as well.

This would be good for the buyers, who could take advantage of today’s low interest rates, enjoy
the tax benefits of homeownership, and begin

generations. It would also be good for the state’s economy by generating all the consequent
economic activity that comes with a new home purchase. The housing market would obviously benefit
as well—a win-win-win.

Of course, some “income-eligible” renters may not qualify for a mortgage because of bad credit, no
credit, previous bankruptcy or foreclosure, no formal documentation of income, or a myriad of other
reasons. However, many may just lack the knowledge about the buying process. Others may be unaware
of FHA and other low-downpayment loans. New programs have even sprung up to help finance buyers who
don’t have traditional credit profiles. Still others may have simply never considered the benefits
or thought homeownership was possible for them. Thus, some sizeable portion of that 1+ million
households could become owners. For those families, education, marketing, and effort could play a
big role in making the difference on the homeownership decision.

There is still a ton of work to do with respect to boosting incomes and providing equality of
opportunity for Californians over the long haul. However, there’s a lot that can be done in the
interim, With rates still incredibly low by historical standards, let’s help more of our neighbors
take advantage of the current environment and the

accumulating wealth for themselves and future
benefits of becoming a homeowner.

Brought to you by:

Ricardo Thomas REALTOR®
Realty World Golden Gate 1300 Clay St., Ste. 600
Oakland, CA 94612

Office: (510) 632-8100
Cellular: 510-632-8100 Email: BRE License: 01407688