As investors continue to buy single-family homes to feed rental demand, and first-time buyers remain unable to afford rising prices, U.S. homeownership is taking a big hit, falling to 63.7 percent in the first quarter of 2015, the lowest level since 1990, according to U.S. Census data released Tuesday.
The seasonally adjusted homeownership rate reflects the share of occupied homes in which an owner lives.
Meanwhile, rentership has increased dramatically since the financial crisis and Great Recession, and continues to do so as the economy improves and more young people move out of their parents’ homes into rental apartments. Many of them straddle jobs while managing student loan debt or other expenses, finding it impossible or extremely challenging to come up with a down payment in the current seller’s market.
The housing market now is characterized by historically low rental vacancies and surging rents. The vacancy rate for rented homes in the U.S. fell to 7.1 percent in the first quarter from 2015 — that’s down from 8.3 percent a year earlier, the Census Bureau found.
It was the lowest first-quarter vacancy rate since 1986. The median monthly asking rent was a record $799, according to the agency.
Weak Incomes, Tight Credit and High Home Prices
Moreover, weak income growth and hard-to-get mortgages, despite low rates, are likely behind the homeownership rate falling to levels not seen since the late 1980s, experts say.
And there’s that pervasive and steady rise in home prices across the nation. In the 20 largest markets, home prices were 5 percent higher in February, compared to the same month one year ago, according to a reported released Tuesday by the S&P/Case-Shiller home price index.
Seventeen cities reported higher year-over-year price increases in the year ended February 2015 than in the year ended January 2015, with San Francisco showing the largest acceleration.
Back to ‘Normal’
With millions of properties still underwater — those homes worth less than owners owe for their mortgage — there is still a stigma attached to owning a home in the wake of the 2007-2008 housing market meltdown and foreclosure crisis.
However, longer-term trends seem to be pushing homeownership rates back to “normal” levels, Sam Khater, deputy chief economist at CoreLogic, told MarketWatch. The market could see even further drops in homeownership, he said.
“In the mid-1990s pro-homeownership policies led to an expansion in mortgage credit and the homeownership rate peaked in 2004 at 69 percent,” Khater said. “Homeownership rates are back to roughly their long-term trend between the 1960s and 1990s.”