Homeownership Stuck in Neutral as Rents Rise

The overall homeownership rate barely budged in the third quarter of 2017, and remains only 1 percentage point above its all-time low reached in the second quarter of last year.  The U.S. Census Bureau put the current rate at 63.9 percent. In the second quarter of 2017 63.7 percent of households owned a home.

The stubbornly low rate has troubled economists and other analysts, with some saying we could be becoming a nation of renters. The rate peaked at 69.2 percent in both the second and fourth quarters of 2004 and has trended down ever since.

Even more troubling is the age distribution of homeownership and what it could portend. While rates have declined from their peaks in the pre-crash period across all age groups, the degree of decline is generally higher among the younger ones. The oldest cohort of Americans, those 65 years and over, has remained relatively high at 78.9 percent in the third quarter of this year compared to 80.2 in 2004. However, among those under the age of 35, the Millennials, it has dropped from 43.8 to 35.6 over the same period. The largest decline was in the 45 to 54-year age group, 13.3 points, with the other two declining from 7.2 points to just under 10 points.

The Midwest retains its historical first-place position for homeownership at 69.1 percent, while the West is the lowest at 58.9 percent, essentially unchanged over the last four quarters.  The rate in the Northeast was 60.4 percent, slightly lower than a year earlier.  The South increased slightly, from 65.0 to 65.5 percent year-over-year.

As always, non-Hispanic White homeownership was the highest among racial groups, 72.5 percent.  Asian, Native Hawaiian and Pacific Islanders were second at 57.1 percent. Black homeownership was lowest at 42.0 percent and 46.1 percent of Hispanic households were homeowners.

Lawrence Yun, chief economist for the National Association of Realtors® said of the homeownership numbers, "The American Dream of home ownership remains elusive, as the third quarter figure shows little change in the overall rate. The reason is simple. There is just not enough supply of homes to fully satisfy the desire to own. The lack of inventory has pushed up home prices by 48% from the low point in 2011, while wage growth over the same period has been only 15%.

The Census Bureau also reported that the vacancy rate in the third quarter was 7.5 percent for rental housing, up 0.7 percentage point from the same quarter in 2016.  The rental vacancy rate was highest in the South at 9.4 percent, and lowest in the Northeast at 5.5 percent.  The rate in the West was 5.8 percent, representing a 1.4 point or nearly 25 percent increase year-over-year. The vacancy rate among homeowner units was 1.6 percent, down 0.6 point on an annual basis.

The cost of housing continued to increase.  The median asking price for rent in vacant housing units was $912 per month in the third quarter, setting a new high.  The asking price for vacant for-sale units was $187,300.

The Bureau reported that the number of housing units in the U.S. increased by 910,000 year-over-year to a third quarter total of 136.7 million units. Of these, 119.09 million were occupied. Occupied rental units totaled 42.94 million and owner-occupied units 76.15 million.  Of the 17.60 million vacant housing units only 1.25 million are for sale.