March 13, 2018 - Article
FEBRUARY 2018 – The homeownership rate in the United States, as measured by the Bureau of the Census, reached an all-time high of nearly 70 percent during the heyday of the pre-financial crisis housing boom. In the aftermath of the boom, however, the prior decade’s gains were largely undone. Twelve years on from its peak, the homeownership rate tumbled to just 62.9 percent in mid-2016, the lowest level since 1965.
In explaining the homeownership decline, multifamily investors have tended to focus on changes in preferences favoring rental housing, particularly amongst Millennials and retirees. Also at work, the decline captures millions of American families that lost their homes to foreclosure, tighter mortgage lending standards limiting access to financing, and a thin pipeline of new homes targeted at first-time homebuyers.
Following years of deterioration, the homeownership rate is showing signs of recovery, increasing to 64.2 percent in the final quarter of 2017. Over the course of the last year, which marked the first year-over-year increase in the homeownership rate since 2004, the number of owner-occupied housing units increased nationally by 1.4 million. At odds with popular perception, the number of renter-occupied units actually fell during the same period, albeit by just 76,000.
Among the many forces at work in nudging homeownership rates higher, it is noteworthy that the largest gains in 2017 were made by householders under 35 years old. For this segment of the population, which includes the renter-dominated Millennial demographic, the homeownership rate increased to 36.0 percent, up from 34.7 percent a year earlier. Offsetting higher prices, a strong job market and mortgage rates that remain low by historic standards may point to further gains in 2018.