It’s well known that the homeownership rate is at a low point owing to a number of factors including demographic shift, the effect of QM on mortgage lending, student loan debt, and tightened credit.
But looking deeper, as Bank of America and ZeroHedge have, it may be worse. Much, much worse.
What however not at all known, is that just like the unemployment rate's major methodological revision several decades ago, so too the homeownership calculation has been "adjusted" in recent years with the consequence of making it appear better than it is.
To normalize for this revision, Bank of America ran a simulation on the US Homeownership rate, in which it "derived a homeownership rate assuming household weights by age group as of 1994. In other words, we only allow for the change in the homeownership rates over time to matter, holding the household age weights constant. Under this methodology, the homeownership rate would have declined to 62.1% last year."
In other words, instead of the most recently announced 63.9% homeownership rate, which was already the lowest since either 1983 or 1994 depending on how one looks at it, when stripping away the adjustment "fudge" which added some 2.3% to the homeownership rate simply because US households have aged, the real homeownership rate is far worse than what everyone believes.
As Bank of America summarizes, "this suggests that the decline in the homeownership rate thus far has been even more dramatic than the published data suggest."
It does indeed, and as the chart below shows, when stripping away the now traditional assumption fudgeswhich have flooded every single data set and made virtually all the New Paranormal data meangingless due to its reliance on pre-Lehman crash demographic and labor participation assumptions, the reality is that not only is the American Dream now completely over, but that the American Nightmare has never been worse, because as BofA just calculated, the real US homeownership rate has never been lower.