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ANALYTICS Or ig i nat ion Fitch Maintains Forecast of Healthy Growth The ratings agency still expects to see a continued rise 'off a very low bottom.' Continued on Page 52 Current conditions may create a generation of homeowners who can better deal with housing costs A s most housing metrics turned around last year, one vital statistic stayed down: the homeownership rate. However, one analyst at Fannie Mae says that low homeownership—when put in context with other data— might indicate a promising trend in sustainability. According to recently published data from the Census Bureau's American Community Survey (ACS), the homeownership rate was down in 2012 for the fifth consecutive year, falling to 63.9 percent—the lowest rate recorded since the survey was fully implemented in 2005 and lower than any rate recorded in any decennial census since 1970. "By most measures, 2012 was a year of housing market recovery, with gains in housing construction, home sales, home prices, and mortgage originations. However, the homeownership rate did not follow suit," said Patrick Simmons, director of strategic planning for Fannie Mae's Economic and Strategic Research Group. At the same time, the ACS recorded significant improvements in housing affordability for all groups, including renters. According to the survey's results, the proportion of households spending at least 30 percent of gross income for housing (the threshold before the situation is considered a "housing cost burden") declined nearly 2 percentage points, bringing it to pre-recession levels. "The improvement for renters is particularly notable, as it broke a string of four consecutive years of declining affordability," Simmons said. "Also of note was a huge improvement in affordability among young homeowners, as evidenced by a drop of 10 percentage points in the rate of affordability problems among 25-to-34-year-old owners during the last five years." According to the 2012 ACS, the 25-to-34-year-old bracket was also the group to see the biggest decline in homeownership, with its rate falling 1.9 percentage points. Since 2007, the homeownership rate for that group has dropped 8.5 percentage points. Together, the data indicate that the swing from owning to renting that started in the recession hasn't come back the other way. However, with housing costs waning and loan qualification standards still tight, Simmons expects homeownership to recover to a rate that can actually hold up. "Tightening of mortgage qualification criteria soon after the onset of the housing downturn probably contributed to the particularly large declines in homeownership rates among young households but may have also helped to create a cohort of young homeowners who have housing costs that are much better aligned with incomes," he said. The M Report se c on da r y m a r k e t slow-growth economy and limited lot availability, Fitch predicts single-family starts should improve by 17 percent in 2013, with multifamily starts gaining 20 percent. On the sales side, the agency expects existing-home Trends Point to Sustainable Homeownership a na ly t ic s "As we have noted previously, recovery in the housing market will likely occur in fits and starts." s e r v ic i ng T hough recent reports seem to indicate a hitch in the ongoing housing recovery, Fitch Ratings maintains its expectations of "a healthy increase in housing metrics" through this year and the next. Noting that slowing price growth and climbing interest rates may have a diminishing effect on the market, Fitch is nevertheless keeping to its forecast of a "continued, below trend line, cyclical rise off a very low bottom." "As we have noted previously, recovery in the housing market will likely occur in fits and starts, and housing absolute numbers are still low relative to past cycles," the company said in its latest analysis. "Expansion should not be expected as a total slope upward, as there are a number of variables that intervene." With the current obstacles presented by the current | 51