From the WSJ (Hat tip Moose):
This month marks 20 years since President Bill Clinton unveiled his “National Homeownership Strategy,” a 100-point action plan that put as its overarching goal achieving an “all-time high level of homeownership in America within the next six years.”
That set in motion an effort by both parties in Washington to work with the private sector to loosen lending standards and make it easier for middle-class Americans with less savings or inherited wealth to purchase homes.
Jean and Jim Mikitz of Allentown, Pa., had just bought a home using a loan backed by the Federal Housing Administration when the Clinton administration was rolling out its homeownership campaign. Their mortgage broker connected them with administration housing officials, which is how Ms. Mikitz ended up introducing Mr. Clinton at his June 1995 speech, a few weeks after they closed on the purchase.
The homeownership rate, then at around 64%, steadily climbed to 69% in 2004, after President George W. Bush similarly embraced a goal of increasing homeownership. Today, the homeownership rate has fallen back to below where it was 20 years ago following the bursting of the housing bubble, which led to millions of foreclosures.
Mr. and Ms. Mikitz’s story, it turns out, also ended in foreclosure. Mr. Mikitz, a 41-year-old mechanic, lost the house in 2004, according to public records. Mr. Mikitz said they stopped making payments on the home when he and his wife divorced. “It pretty much forced me into bankruptcy,” he said. His former wife couldn’t be reached for this article.
There’s considerable evidence that the worst excesses of the housing bust stemmed less from homeownership and more from speculative purchases that drove home prices higher—as opposed to owner-occupied purchases. Home prices peaked in 2006, two years after the homeownership rate stopped rising.
Moreover, the downturn was exacerbated by the hundreds of billions of dollars that homeowners pulled out of their homes in the form of home-equity loans and cash-out refinancing, which left millions of households at risk of foreclosure even if they bought their homes well before the bubble inflated.
The problem: Many households can’t afford to buy homes because they don’t have the income or savings to qualify for a loan, and lenders have tightened standards. At the same time, rental growth is soaring, pushing up rents, and leaving families in a spot where they can’t qualify for a loan and where they can’t afford the rent.