WASHINGTON – Homeownership rates for low-income families with children have fallen over the last 25 years as result of rising housing costs and changes in family composition, a new study says.
Maryland exemplifies these rising costs, with an average home price that has doubled in the last five years.
Though nearly 70 percent of Americans now own their homes — the highest ever — the percentage of low- and moderate-income families with children that own homes fell 2.9 percent from 1978 to 2003, according to the Center for Housing Policy’s study of U.S. homeowner trends.
The biggest homeownership gains over that period were made by families without children and upper-income families with children. While rates for families with one or two children have remained steady, homeownership rates for families with three or more children have declined, falling more than 10 percent since 1978.
Jeffrey Lubell, executive director of the Center for Housing Policy, said changes in household composition over the last 25 years are in part to blame. The percentage of working families with children and a single parent doubled, 18 percent to 36 percent, from 1978 to 2003.
It is easy for people to see the high overall homeownership rate and assume there is no problem, Lubell said. But there is a large segment of the population not poor enough to qualify for federal housing aid that can’t afford to own a home.
“Homeownership costs have outpaced income growth,” he said. “It’s become harder and harder for families with children to afford their homeownership costs, despite low interest rates.”
Certainly Maryland typifies that trend. The state’s booming home prices have made it harder and harder since 2001 for typical first-time buyers to afford a home.
Maryland’s average starter home price has more than doubled since then, from $117,801 to $247,160, according to the Maryland Association of Realtors. And the median home price in the state rose to $290,776, a 109 percent increase, from 2001 to 2006.
Average home prices in Maryland grew 15.2 percent over last year, outstripping the nation’s 13 percent average rise.
Because of the inflated home prices, the typical first-time Maryland home buyer has less than half the income needed to afford the average starter home. January’s First Time Homebuyer Affordability Index shows they have an average of 46.8 percent of the income needed, down from 80.1 percent in 2001.
Al Ingraham, president of the Maryland Association of Realtors, said low interest rates and flexible mortgages with little or no down payments in the last three to five years have enabled more Americans to own their homes than ever before.
“You can now buy a home with 100 percent financing,” he said.
High home prices are a problem in the area because growth in wages hasn’t kept pace. A recent solution, Ingraham said, is cooperative buying: friends or siblings who pool resources to purchase a home.
Housing in Maryland is a seller’s market that has been skyrocketing for years, said Claire Hodgkin, a realtor who sells homes in the Baltimore-Washington area. Because of interest rates below 6 percent until recently, many more houses in Maryland have been bought up by investors looking for an alternative to the stock market, Hodgkin said. They create more competition in the market, driving housing prices up.
She has seen the market cool somewhat since the fall, with more expensive homes staying on the market longer.
“The lower-priced houses go very quickly,” she said. “But we’re moving toward a buyer’s market.”
But Hodgkin doesn’t think the area will experience a bust and send home prices dropping; she said the housing market will stabilize from the recent growth spurts we’ve seen to about 3 to 4 percent annual growth.
– 30 – CNS-3-23-06