Seven out of 10 non-vacant Ohio homes were occupied by owners during the three-year period ending in 2007, just as the recession was beginning. But from 2011 through 2013, that rate had dwindled to less than two out of three, according to the analysis of data from the U.S. Census Bureau.
Ohio had plenty of company; no state had an increase in homeownership during the period surrounding the recession. Nevada had the biggest decline, 5.8 percentage points, followed by Arizona (5.7) and Florida (4.5).
Likewise, all of the nine counties in the Dayton region saw decreases in home ownership rates during the nine-year period.
Also, the U.S., Ohio and all but two local counties saw larger declines in their homeownership rates during the three-year period of 2011-2013, despite the fact that the recession had ended and the nationwide economic recovery had begun.
Montgomery County Clerk of Courts Greg Brush said foreclosures in the county crested in 2009 and have been falling every year since.
Part of the reason the homeownership rate has not turned around, Brush said, is that the foreclosure process can take two to three years before a property is cleared to a new owner. If it clears.
“If you would have said in ‘06 when I came in that there are going to be houses that go to (foreclosure) sale that nobody buys, we would have thought you were nuts,” Brush said. “A couple years later, there are a lot of things out there that don’t sell. Then they just sit out there and languish.”
Clark County had the largest rate drop in the region at 5.1 percentage points over nine years, followed by Montgomery County with a 4.6-point decline.
But Montgomery County lost more than 12,300 owner-occupied homes during the nine years studied, dwarfing Clark County’s estimated loss of 3,500.
Contributing to the homeownership woes of both counties were drops in total occupied homes caused by abandonment and demolition. Montgomery County lost an estimated 3,100 such homes, while Clark County lost more than 1,000.
‘Last in, first out’
Local real estate expert, Doug Harnish, owner of Market Metric$ LLC, said the drop in homeownership in Montgomery County and the region as a whole has been caused by a collision of economic forces.
First, the financial crisis began in late 2007, dragging the nation into recession, Harnish said. Then the housing bubble burst in 2008, causing housing values to go down, jobs to disappear, and foreclosure rates to spike.
Because sub-prime or risky loans were such a large part of new mortgages in the years leading up to 2008, Harnish said, “those were the people who got washed away first.”
“Last in, first out, so to speak,” he said. “That was part of the decline in the percentage of homeownership. And that really continues to percolate today. Although the volume has dropped somewhat, we still have foreclosures in the pipeline.”
So thousands of people lost their homes and thousands declared bankruptcy, which locked them out of the housing market for several years, Harnish said. Then, lending standards were modified by Congress, eliminating risky loans while imposing strict conditions to get a home mortgage.
Borrowers now not only have to put down 20 percent, he said, but they also have to have good credit and can’t be carrying too much debt.
“So we’re finding a lot of people today because of outside debt burdens really can’t make the minimum threshold to borrow,” Harnish said.
In addition, he said, structural changes in employment, such as increased use of part-time and temporary workers, and post-recession losses in housing value make prospective buyers less willing to make a bet on buying a house.
“All of these factors, I think we’re kind of creating a lot of momentum to see a lot more people going into the rental market versus the homeownership market,” Harnish said.
‘Hands are tied’
Data from the first half of 2014 show that homeownership rates in Ohio seem to be stabilizing, said James Thurston, spokesman for Ohio Bankers League.
But Thurston said two main issues are at play in the slow housing recovery. One is a demographic shift and a reluctance of young people to take on debt.
“The millennials are coming out of college,” Thurston said. “They have more student debt. They’ve seen their own parents’ houses lose a decent amount of value.
“So whereas you and I might have come out of college looking at homeownership as one of the main building blocks of building wealth, they may be looking at it as a risk.”
Another big impediment in a bank’s eyes, he said, are federal lending restrictions written into the Dodd-Frank Act, passed by Congress in July 2010 to reign in the lending and financial abuses that triggered the housing crisis and recession.
Thurston said local banks know their markets and customers and were free in the past to work more with borrowers to secure a loan.
“But the framework they’re working in, particularly with Dodd-Frank, does not give them any room to be flexible,” Thurston said. “So our hands are tied now in a lot of ways, whereas previously we could have gone the extra mile to meet the needs of the customer.”
Warren Co. dips
Even fast-growing Warren County, which continued to see increases in owner-occupied homes during the nine-year period, saw a 2.6 percentage-point drop in the homeownership rate.
“I think there is correlation between the foreclosure rates that we went through — and the peak was in 2009 — and in our small drop in homeownership,” said Warren County Commissioner Pat South.
Another factor was that her county had so far to fall. In the 2008-2010 period, the county had an average homeownership rate of 80.0 percent — the highest in the region. Three years later, that rate had fallen 3.4 points to 76.5 percent, behind only Preble County’s 77.1 percent in the region.
But South is happy to report that foreclosures have been steadily falling since 2009.
“We’re actually seeing an increase in new construction and the real estate market and property values in 2014,” South said. “We certainly saw decreased activity like everybody else during the downturn. But we never stopped getting new jobs. Our Economic Development department has been very, very busy.”
Two-thirds normal
In Clark County, which had the highest drop in the region, the 5.1 point decrease could be viewed as a correction, said Kerri Brammer, homeownership center manager for the nonprofit Neighborhood Housing Partnership of Greater Springfield.
The county started the period with a 72.1 percent homeownership rate and fell to 67.0 percent.
“Two thirds, 66-67 percent, is kind of the norm for homeownership,” Brammer said of her county. “Seventy-two percent, that was a little high.”
Like Montgomery County, the Springfield area is still recovering from its economic problems, she said.
“Obviously we’ve had a lot of unemployment issues — people losing work, regaining employment at a reduced wage.”
And, she said, before the bubble burst, a lot of lenders were doing “special programs.”
“There were 100 percent loans with no down payment. So there was a definite push to get people into homes, whether or not that was smart,” she said.
Brammer said her organization offers classes and counseling to help people make smart choices when buying a home.
Beth Deutscher, executive director of the Homeownership Center of Greater Dayton, is on the same mission. She said owning a home can still be a good move for many people.
“We live in a very affordable market,” Deutscher said. “If somebody is paying a decent amount in rent, they can afford to buy a house.
“We definitely want to help people to realize that they don’t need to be afraid of HO. That it’s still a good investment.”
The center has been seeing less demand in people needing help preventing foreclosures, she said, and that’s a relief.
Like the Springfield organization, Deutscher’s nonprofit has classes and counseling for first-time homebuyers, and can offer down-payment assistance for those who qualify.
The main goal, she said, is to help people buy a home, and to help them be successful.
“We don’t just want people to get into a house,” Deutscher said. “We want them to get into the house and be able to stay there.”
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