U.S. housing prices soared in the 1990s and early 2000s. This was very good for the United States because a strong housing market has historically been a bellwether for the overall strength of the U.S. economy. House price appreciation was also good for existing homeowners, especially because most household wealth is concentrated in housing. Unfortunately, home appreciation was not good for the financially strapped renters who were struggling to become the homeowners envisioned in the Happy Homeownership Narrative. To ensure that Americans continued to buy homes, the United States intervened yet again in housing finance markets. Like the government’s massive intervention after the Great Depression, changes in the mortgage finance market during the 1990s and early 2000s succeeded in helping cash-strapped renters buy homes. Unlike the post-Depression interventions, however, these recent fixes were short-lived primarily because the government’s attempt to solve the problem of stalled homeownership rates mischaracterized the actual problem Americans faced: far too many people simply cannot afford to be homeowners.

Stalled Homeownership Rates, Soaring Appreciation Rates

As shown in Figure 4.1, even though overall homeownership rates now exceed 60 percent, less than 40 percent of U.S. households owned homes before the turn of the twentieth century. During the first few decades of the twentieth century, homeownership (mostly farm-ownership) rates remained relatively stable. Rates dipped only slightly in the first few years of the twentieth century as the United States shifted from a farming to a nonagrarian economy. Non-farm-ownership rates continued to have modest increases until the 1930s, when rates stalled and then fell because of the Great Depression.