St. Louis Fed Looks Back at Homeownership Rates Before and After the Crisis in Housing Market Perspectives

ST. LOUIS – New research reveals past homeownership rates are a powerful negative predictor of post-crisis recovery. William Emmons, assistant vice president, and chief economist of the St. Louis Fed's Center for Household Financial Stability, believes it makes sense for these outcomes to be related, since problems in housing and mortgage markets were at the center of the financial crisis and the Great Recession.

The key takeaways for this quarter’s Housing Market Perspectives are:

• Research shows a strong correlation between a country’s homeownership rate pre-crisis and both its per capita growth and homeownership rate post-crisis.

• Higher homeownership rates before the crisis predicted larger growth declines and vice versa.

• The large drop in U.S. homeownership from 2005 to 2015 reflects the severity of the housing crisis here.

In this second quarter report, Emmons shares the relationship between homeownership before the crisis and change in per capita growth after the crisis, 1990-2005 to 2005-2017. Over the past few decades national homeownership rates have varied widely across and within various countries.

“While the crisis affected homeownership more in the U.S. than in other rich countries, the U.S. growth slowdown was no worse than one would expect based on its pre-crisis homeownership rate,” Emmons writes. “This suggests that components of economic growth other than housing were somewhat stronger in the U.S. than elsewhere.”