Bloomberg has the following headline and article:

“Home Vacancies Rise as U.S. Ownership Falls to Lowest in Decade.”

Most will take this as bad news, and it is, but not for the reasons many will think.  Most will lament the decline in home ownership, as if it is somehow a slide away from the American dream.  It’s not.

The real problem with the data release is that it shows us that too many still own their own home, and the rate of home ownership is not falling quickly enough.  Bear with me while I explain.

First, we need to agree that not everyone should own their own home.  Some people’s circumstances or personalities are such that home ownership is just not appropriate.  They may need geographic mobility.  Perhaps their income is not steady.  They may lack the discipline home ownership requires.

Once we agree that not everyone should own a home, the question becomes: What is the appropriate percentage of home ownership.  Economic theory gives us no answers, but the data do.  For the United States, it appears that about 65 percent is the highest sustainable rate of home ownership.

Home ownership rates started climbing above 65 percent in the 1990s, a result of well intentioned and deliberate public policy.  Eventually, America’s home ownership rate exceeded 69 percent.  That is when things began to go seriously wrong.

Unfortunately, governments have been doing their best to prevent or delay us from getting back to the stable 65 percent.  The result is that it has taken us two years to get from our high to today’s 66.9 percent.  Getting under 67 percent is encouraging, but we need more before our real estate markets are healthy.  At the rate we’re going, that could be a while.