Homeownership Rate Drops for 1st Time in 2 Years

Mike Sorohan msorohan@mba.org

April 26, 2019

The Census Bureau yesterday said the U.S. homeownership rate fell for the first time in two years amid market volatility and a decline in consumer confidence.

The report said the U.S. homeownership rate fell to 64.2 percent in the first quarter, from 64.8 percent in the fourth quarter but unchanged from a year ago. Homeownership rate was highest in the Midwest (68.2 percent), followed by the South (66.2 percent), Northeast (60.7 percent) and West (59.8 percent), largely unchanged from a year ago.

Homeownership rates were highest for those householders ages 65 years and over (78.5 percent) and lowest for those householders under 35 years of age (35.4 percent). By race, homeownership rates for non-Hispanic White householders was highest at 73.2 percent. The rate for Asian, Native Hawaiian and Pacific Islander householders was second at 56.9 percent and Black householders was lowest at 41.1 percent. The homeownership rate for Hispanic householders was 47.4 percent.

"The market volatility and decline in consumer confidence that we saw in late 2018 and early 2019 seemed to confirm what other housing indicators showed: a somewhat slow first couple of months of the year for the housing market," said Joel Kan, Associate Vice President of Economic and Industry Forecasts with the Mortgage Bankers Association. "A large portion of the decline was driven by the younger age groups, both households under 35 and households between 35 and 44 years old. Owner occupied households grew at a slower rate than the past two years, but still exceeded one million in the first quarter. Renter households increased almost 500,000 compared to a year ago."

Ralph McLaughlin, Chief Economist with CoreLogic, Irvine, Calif., noted the flatness in the homeownership rate was partly attributable to a strong uptick in new renter households, although growth among owner households continues to strongly outpace renters.

"While the homeownership rate was flat over the past year, the first quarter of 2019 was the sixth consecutive quarter that owner-occupied households grew by more than a million, at nearly 1.1 million new owner households," McLaughlin said. "At the same time, the number of new renter households jumped by close to half a million. This is a significant change in trend, as renter households previously fell six out of seven quarters. Total household growth remains remain strong, topping 1 percent for six straight quarters, and continues the most significant streak of household growth in more than 12 years."

The report said national vacancy rates in the first quarter stood at 7.0 percent for rental housing and 1.4 percent for homeowner housing. The rental vacancy rate of 7.0 percent was virtually unchanged from a year ago, but 0.4 percentage points higher than the fourth quarter (6.6 percent). The homeowner vacancy rate of 1.4 percent was 0.1 percentage point lower than a year ago (1.5 percent), but unchanged from the fourth quarter.

The homeownership rate of 64.2 percent was virtually unchanged from the rate in the first quarter 2018, but 0.6 percentage points lower than the rate in the fourth quarter 2018 (64.8 percent).

The report said 87.9 percent of the housing units in the United States in the first quarter were occupied; 12.1 percent were vacant. Owner-occupied housing units made up 56.5 percent of total housing units, while renter-occupied units made up 31.4 percent of the inventory in the first quarter 2019. Vacant year-round units comprised 9.2 percent of total housing units, while 2.8 percent were for seasonal use.

The report said 2.4 percent of the total units were for rent, 0.8 percent were for sale only and 0.7 percent were rented or sold but not yet occupied. Vacant units that were held off market comprised 5.3 percent of the total housing stock--1.5 percent were for occasional use, 1.0 percent were temporarily occupied by persons with usual residence elsewhere and 2.9 percent were vacant for other reasons.

"These data show increasing evidence that not only are young homebuyers are indeed pursuing the American dream of homeownership, but solid household growth overall should continue to support healthy demand over the next two decades," McLaughlin said. "An estimated 46 million new households under the age of 30 will push up demand for both owner and renter-occupied homes over the next two decades. Despite recent headwinds and signs of a market cooldown, these demographic fundamentals should lead to a healthy housing demand through at least 2040."

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