The Homeownership Rate Is Now the Lowest Since 1989, But There’s a Silver Lining – Real Time Economics

A for-sale sign in San Rafael, Calif. Many new households are renting, which drives down the homeownership rate as a percentage of total households, but provides a glimmer of hope in the long term.
JUSTIN SULLIVAN/GETTY IMAGES

The U.S. homeownership rate continued to decline in 2015, hitting its lowest level since 1989. But economists saw a silver lining in that number.

The seasonally adjusted homeownership rate declined to 63.8% in the first quarter of 2015 compared with 65% in the first quarter of 2014, according to estimates published by the Commerce Department on Tuesday.

For the second consecutive quarter, the number of total households–renters and owners–jumped significantly. Because many of those new households are renting, that can drive down the homeownership rate as a percentage of total households, while providing a glimmer of hope in the long term.

The report estimated that renter households increased by more than 1.8 million from the first quarter of 2014, while the number of owner households decreased by 386,000. The quarterly estimates are viewed as not terribly reliable by some economists, but the numbers suggest a step in the right direction.

Economists have been waiting for 20-somethings to emerge from their parents’ basements and begin renting on their own. That is important for the owner-occupied market because, eventually, those renters will likely buy homes.

“Many of those new renter households will become homeowners, but probably not soon,” said Jed Kolko, chief economist at Trulia.

The homeownership rate has fallen steadily since 2005, when it peaked at 69.2%. That followed a decadelong campaign to expand the homeownership rate, launched by President Bill Clinton in 1995 and embraced by President George W. Bush in the early 2000s.

Economists said that they expect the homeownership rate to plateau at some point in the coming months but that it will likely be a long wait before it improves significantly. In part that is because people who went through foreclosure are struggling to repair their credit and accumulate down payments to return. Younger people are also putting off marriage and children and thus homeownership.

Another bright spot is that the vacancy rates for both rental apartments and owner-occupied homes was low, economists said. The rental vacancy rate fell to 7.1% in the first quarter of 2015 from 8.3% the year earlier.

The homeowner vacancy fell to 1.9% from 2% in the first quarter of 2014.

“We’re going from a market that was vastly oversupplied in the bubble to one that is vastly undersupplied,” said Mark Zandi, chief economist at Moody’s Analytics Inc.

Nick Timiraos contributed to this article.

Related reading:

Why New Homes Have Become More Expensive: They’re Much Bigger

U.S. Homeownership Rate Falls to 20-Year Low

The Homeownership Rate for Millennials Has Hit Bottom

Wealth, Homeownership Lag for Americans With Student Debt

Student Debt Is Hurting Homeownership For Blacks More than Whites

How Much Will Student Debt Drag on Housing?

Why More Renters Aren’t Buying (Hint: Weak Incomes, Savings)

 


 


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28 April 2015 | 5:14 pm – Source: blogs.wsj.com

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