Owning a home has fallen in popularity to levels last seen during the heyday of grunge rock.
Homeownership in the United States continued to tick downward, hitting its lowest rate in nearly 18 years, according to Census Bureau data released Tuesday, a sign that more families are choosing to rent rather than buy homes as the economy remains weak.
The percentage of housing units sitting vacant, both for-sale homes and rentals, also fell from last year, reflecting the historically low level of both for-sale housing inventory and residential construction, as well as the growing ranks of renters.
In the first quarter of 2013, the U.S. homeownership rate fell to 65%, the lowest rate since the autumn of 1995. It’s down from 65.4% a year ago (it was also at 65.4% in the last quarter of 2012).
The easy mortgage-lending conditions of the last decade caused homeownership to soar to a peak of 69.2% in the middle of 2004, but the collapse of the housing market and subsequent wave of foreclosures erased those gains.
At the same time, rental vacancy fell to 8.6% from 8.8% a year earlier, a sign that rental housing inventory is tightening nationally. The last time rental vacancy was lower than 8.6% was in 2002. The vacancy rate among for-sale homes rose to 2.1% from 1.9% a year earlier, but remains well below the high levels of vacancy reached during the housing bust.
Separately, on Tuesday the Standard & Poor’s/Case-Shiller index tracking home prices in 20 U.S. cities posted a yearly gain of 9.3% in February, the highest rate of appreciation in seven years.
Economists expect this cocktail of rising renter demand, falling rental vacancy and low inventory of for-sale homes to result in higher housing costs for most Americans.
“The implication is that there’s still plenty of upward pressure on rents,” wrote Paul Diggle of Capital Economics, in a Tuesday research note. Additionally, “tight supply and strengthening demand—both of which show few signs of abating—are driving house prices higher,” Mr. Diggle wrote.
The government calculates homeownership by comparing the number of properties with people living in them to the total number of owner-occupied properties. It estimates that 74.5 million housing units were owner-occupied in the first quarter, compared with a total of 114.6 million occupied homes.
The rate of homeownership fell sharply in the last year among middle-aged people aged 40 to 44 years old, falling from 65.9% in the first quarter of last year to 64.4% today; among people aged 65 and older, it went from 80.9% to 80.4%. The homeownership rate grew among younger people, from 34.2% to 34.4% for those aged 25 to 29, and from 48.3% to 48.9% among 30-to-34-year-olds.
“The number has gone down for middle-aged people because they’re the ones who lost their homes to foreclosure,” says Brad Hunter, chief economist for Metrostudy, a Houston-based housing research firm. “The uptick among young people is what we can describe as the allure of newly rising prices and low interest rates.”
Original Source: Robbie Whelan for The Wall Street Journal