WSJ: 'Lopsided' housing recovery creating permanent renter class

Dive Brief:

Home prices rose again in the second quarter, pushing homeownership out of the reach of renters and resulting in 200,000 to 300,000 fewer households buying a home each year, The Wall Street Journal reported.
Lack of affordable inventory combined with damaged renter credit, huge student loan debt and strict lending requirements are keeping millions of Americans from being able to create wealth through home equity.
Many economists, according to The Journal, anticipated an uptick in the homeownership rate this year, but instead it fell to the 51-year low of 62.9%, and some are predicting that number will fall to 58% or lower by 2050.

Dive Insight:

Although National Association of Realtors Chief Economist Lawrence Yun said low mortgage rates and solid job growth had brought "buyers out in force," The Journal reported that the rise in prices was driven by a lack of inventory, not a surge of buyers. Yun added that the lack of construction activity needed to keep pace with demand was pushing prices above income growth in many markets.

The median home price increased 6.1% year over year to $240,700 in the second quarter, according to the NAR. Total existing home sales were 5.5 million, a 3.8% increase from the first quarter and 4.2% more than in the second quarter of 2015.

If households are not able to make the entry into homeownership, they will remain vulnerable to ever-increasing rents, making it even more difficult to save money for retirement and other purposes and creating a "lopsided" recovery. Home equity makes it possible for homeowners to pay for college, home improvements and small luxuries like vacations. This "divide" between homeowners and renters could result in a permanent renter class made up of individuals and families who have completely given up on buying a home, according to The Journal.

Despite the negative reports about the inequity of the housing market, housing experts continue to tout the "slow and steady" post-recession recovery as an indication that the market will be made whole eventually. And despite the drop in the homeownership rate, an NAHB survey released last month found that 82% of Americans believe buying a home is a good investment. However, the survey also found that 55% of respondents said they had trouble finding an affordable home, 50% didn't have enough saved for a down payment, and 41% couldn't get approved for a mortgage.