Homeownership Rates Slip

Government data reported that the share of privately owned U.S. homes fell to a 15-year low in the first quarter. The home ownership rate slipped to 65.4 percent, the lowest since the first quarter of 1997, according to the Commerce Department.  The rate was at 66.0 percent in the fourth quarter.  Homeownership was lowest in the West, while higher rates were reported in the Midwest, most likely a result of lower housing prices.

 

House prices have dropped about 32 percent from their peak at the end of 2005, leaving millions of Americans with houses worth far less than their mortgages and pushing many into renting.  In the first quarter, the median asking sales price for vacant homes on the market was $133,700, the lowest since the first quarter of 2005, the Commerce Department said.  In comparison, the fourth quarter recorded $133,800.  The data showed the residential rental vacancy rate dropped to 8.8 percent in the first three months of this year from 9.4 percent in the fourth quarter. Growing demand for rentals is boosting rents, with the median asking rent for an unoccupied property in the first quarter at $721, the highest since the first quarter of 2009.  This is compared with $712 in the fourth quarter.

Stronger demand for rental apartments is helping to stabilize the housing market as builders break more ground on multifamily housing projects.  Residential construction in the first quarter grew at the fastest pace in nearly two years and is expected to contribute to growth this year for the first time since 2005.

 

Despite low homeownership levels, there remain obstacles to boosting homeownership.  Strict lending practices, a volatile foreclosure market, a shaky but seemingly slowly improving job market, and fears that the market has further to fall, all contribute to demand for rentals versus home buying.  Much of the U.S. population is still in a struggle with high debt and stagnant income and job security may not return to pre-recession levels for a few years.  Even if the reasons to own a home return with rising prices, the ability to buy one may not.  Of course, trends will vary by region, as some areas may see faster improvement than others.

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