Rick BissonIn many ways owning a home has defined our nation throughout its history. Then and now, homeownership has provided pride, security and a place to call home. Often referred to as the American Dream, this ambition remains intact today – with a few challenges.

According to a white paper titled, “Hurdles to Homeownership: Understanding the Barriers,” affordability challenges, student loan debt, tight credit conditions and housing supply shortages are key contributors hamstringing the U.S. homeownership rate at a near 50-year low.

Released at the June 2017 National Association of Realtors Sustainable Homeownership Conference at University of California, Berkeley in recognition of National Homeownership Month, the conference addressed the decline and idleness in the homeownership rate, its drag on the economy and what can be done to ensure more credit-worthy households have the opportunity to buy a home.

The report identifies five main barriers that have prevented a significant number of households from purchasing a home. Here is a recap.

The Great Recession of 2007 was a significant and historical game changer for homeownership. Lasting for nearly two years, the ripple effects continue to impact the U.S. housing market. Ten years later, despite steadily improving local job markets and historically low mortgage rates, long-lasting psychological changes continue to impact decision-making for the 9 million homeowners who experienced foreclosure, the 8.7 million people who lost their jobs and young adults who witnessed the hardships of their family and friends.

Second, changes made to credit standards in reaction to lax lending standards leading up to the Great Recession have not normalized. Borrowers with good to excellent credit scores are challenged with tightened lending requirements, hampering approval rates.

Third, student debt repayment for young households makes it extremely difficult for this large pool of buyers to save for a down payment, qualify for a mortgage and afford a mortgage payment, especially in areas with high rents and home prices. A NAR 2016 survey revealed student loan debt is delaying purchases from Millennials and over half expect to be delayed by at least five years.

NAR Chief Economist Lawrence Yun said at the conference, “Low mortgage rates and a healthy job market for college-educated adults should have translated to more home sales and upward movement in the homeownership rate in recent years. Sadly, this has not been the case. Obtaining a mortgage has been tough for those with good credit, savings for a down payment are instead going towards steeper rents and student loans, and first-time buyers are finding that listings in their price range are severely inadequate.”

Fourth, the report cited the current and future effects affordability may have on homeownership. A lack of available homes for sale, higher rents and home prices and difficulty saving for a down payment are contributing factors to affordability. According to the report, unless these conditions subside, affordability will fall by an average of nearly 9 percentage points across all 75 major markets between 2016 and 2019, with approximately 5 million fewer households able to afford the local median-priced home by 2019.

Fifth, a shortage of single family homes for sale is still failing to keep up with demand as certain markets see increased migration and population as the result of faster job growth. This insufficient level of homebuilding has created a cumulative deficit of nearly 3.7 million new homes over the last eight years. In these “hot” markets, fewer property lots, difficulty finding skilled labor and higher construction costs are among the reasons the report says housing starts are not ramping up to meet the growing demand for new supply.

NAR 2017 President William E. Brown summarized the reports findings saying, “The decline and stagnation in the homeownership rate is a trend that’s pointing in the wrong direction, and must be reversed given the many benefits of homeownership to individuals, communities and the nation’s economy. Those who are financially capable and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream.”

Most Americans still have positive feelings about homeownership. Continued economic gains, low mortgage rates and more homes for sale may be the best remedy to restore confidence in the market, increase building, alleviate supply shortages and preserve affordability for prospective buyers.

If you, or someone you know, is considering selling or buying, consult with a Realtor.

This column is produced by Rick Bisson and his family, who own Bisson Real Estate with Keller Williams Realty of Midcoast and Sugarloaf.