The homeownership rate is on the decline again. The latest numbers reflecting the fourth quarter of 2016 show the homeownership rate fell from 63.8 percent a year earlier to 63.7 percent, the Census Bureau reported.
While the drop may seem slight, it reflects an overall trend for homeownership in the country for the past few years. The historical average for the homeownership rate is about 65 percent.
Despite housing market improvements, the homeownership rate continues to drop due to tight credit conditions and the many young households saddled with student debt and low wage growth who are delaying first-time purchases, The Wall Street Journal reports.
Further, rising home prices and rents are making it more difficult for would-be buyers to save for a down payment. The biggest culprit for the decrease in the homeownership rate may be the fact that more young people are opting to continue to live with their parents and more people are choosing to rent instead of own, economists say.
The latest Census data shows that 805,000 new households were created in the fourth quarter of 2016. Fifty-four percent of those new households, however, were renter-occupied.
Mark Zandi, chief economist at Moody’s Analytics, says he believes the homeownership rate has bottomed out. He predicts it will hover around 63.5 percent until the beginning of the next decade.
The millennials may still be the generational force that turns around the homeownership rate. But the housing industry may still be a few years off until they gain traction. Americans usually purchase their first homes in their early 30s. The median age of the millennial generation is still just 27 years old, says Zandi.
Source: “Why the Homeownership Rate Isn’t Likely to Take Off Anytime Soon,” The Wall Street Journal (Jan. 31, 2017)