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After Hitting a 51-Year Low, the Homeownership Rate’s on the Rise
The homeownership rate edges back up from a five-decade low amid tentative signs that renter families are starting to gain the confidence to buy homes.
The nation’s homeownership rate, which has dropped sharply for years, could be at a turning point. It hit 63.5% in the third quarter, the Census Bureau said Thursday. That is a significant jump from the prior quarter, when it hit 62.9%, the lowest point in 51 years.
There were other reasons for optimism in Thursday’s release. About 1.1 million households formed in the third quarter, a significant jump from about 944,000 in the prior quarter.
More crucially, about half of the new households formed were owners, rather than renters. About 560,000 new owner households were formed this quarter, up from a roughly 22,000 decline in the second quarter. In order for the homeownership rate to rise, more owners need to form households than renters.
“For me the big reason to be optimistic is looking at household formation,” said Ralph McLaughlin, chief economist at Trulia.
The persistently low homeownership rate has been one of the most troubling aspects of the recovery. Home prices are back within 0.1% of the July 2006 peak, according to S&P CoreLogic Case-Shiller Indices, driven by a lack of inventory and low interest rates. Nonetheless, young people are still struggling to afford houses due to tight mortgage credit, difficulty saving for a down payment and a lack of starter-home availability.
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