Why do we care?
Homeownership is both a family and a social goal in the United States. For the family, homeownership offers a degree of security not usually available when renting. It helps families accumulate financial equity, which they might not otherwise be able to do. From the community perspective, homeownership establishes residents as long-term stakeholders in the area, contributing to a sense of civic responsibility. When people own their homes, they are more likely to invest funds in physical improvements, and to invest time in social programs that help build cohesiveness in the community.
How are we doing?
The comparison between home prices and personal income offers an interesting way to evaluate the feasibility of home ownership. As Figures 20.1 and 20.2 show, both per capita personal income and home prices have risen significantly between 1990 and 1999. However, the rate of growth of per capita personal income is faster than that of housing price; over the nine-year period personal incomes rose 39.6%, while home prices rose 29.3%. While New Jerseyans often regard home prices as exorbitant, in fact we were better able to afford them at the end of the decade than we were at the beginning.(1)
What is behind these figures?
The availability of housing is a major consideration for businesses deciding where to locate. The home vacancy rate shown in figure 20.3, gives a sense of how easy it is to purchase a home in the state. It has been quite low in New Jersey for the past decade, fluctuating between 0.7% and 2.0% between 1986 and 2002, as Figure 20.3 shows. By comparison, the national average has been significantly higher than the New Jersey rate for most of that period.
The home ownership rate, measured as the number of New Jersey residents who live in owner-occupied homes divided by the total number of residents, remained largely unchanged over this time period. As Figure 20.4 shows, it hovered between 62% and 65% from the 1980s through the 1990s, and rose to 67% by 2002. The recent rise may be more a response to lower interest rates than to the increases in income relative to home prices. It could also be the result of demographic change, as maturing baby boomers interested in purchasing homes form a larger share of the state’s population. During the same period, the national homeownership rate increased from 63.9% to 67.4%, which is consistent with the demographic explanation.
Targets with which to assess state progress have not yet been established for this indicator.
(1) Unfortunately, home price data are not publicly available after 1999, so we cannot track this comparison into the 21st century.