Tuesday, May 6, 2014

Declining Homeownership in America

Interesting data released from the Census Bureau gives us some sense of why the housing market, particularly in some areas of the United States, is not recovering.  

Here is the graph that tells the story:

Non-seasonally adjusted home ownership rates peaked at 69.2 percent in both the second and fourth quarter of 2004.  Since then, they have drifted lower, hitting the current level of 64.8 percent in the first quarter of 2014.  This brings us back to ownership levels last seen in mid-1995.  At the end of the recession in the second quarter of 2009, home ownership rates were still at 67.4 percent and have continued to fall since then.

Home ownership rates vary substantially across the nation as show here with current and levels in the second quarter of 2009:

Northeast: current - 62.4 percent  Q2 2009 - 64.3 percent
Midwest: current - 69.3 percent  Q2 2009 - 70.5 percent
South: current - 66.5 percent  Q2 2009 - 70.0 percent
West: current - 59.4 percent  Q2 2009 - 62.5 percent

Home ownership rates are lowest in the western part of the United States, just as they were at the end of the Great RecessionIn all regions, home ownership rates are down from the end of the Great Recession, most substantially in the south and west where ownership rates dropped by 3.5 percentage points and 3.1 percentage points respectively or 5 percent in both areas.

It is also interesting to see how homeownership rates by age have changed since 2009 as shown here:

Under 35 years: current - 36.2 percent  Q2 2009 - 39 percent
35 to 44 years: current 60.7 percent  Q2 2009 - 66.8 percent
45 to 54 years: current 71.4 percent  Q2 2009 - 74.5 percent
55 to 64 years: current 76.4 percent  Q2 2009 - 79.9 percent
65 and older: current - 79.9 percent Q2 2009 - 80.4 percent

Home ownership rates dropped the most for households aged 35 to 44 years with a drop of 6.1 percentage points or 9.1 percent from Q2 2009 to the present.  Home ownership rates for households aged 65 and older barely budged.

Lastly, here is a look at home ownership rates by family income (above or below median) and how rates have changed since 2009:

Above median: current - 79.8 percent  Q2 2009 - 82.2 percent
Below median: current - 49.8 percent  Q2 2009 - 51.5 percent

The drop in homeownership rates for both income groups was roughly the same on a percentage basis.

Several factors are working against potential homeowners:

1.) The recent rise in the price of homes in some of America's largest markets.

2.) Mortgage rates that have risen from under 3.5 percent in early 2013 to nearly 4.5 percent today (30 year mortgage rates).

3.) Tight mortgage lending standards

4.) A job market that seems capable of producing millions of  low-paying jobs to replace higher-paying jobs.

These factors are working together to put home ownership out of reach for many Americans, particularly those Americans that are under the age of 45.  With the shrinking number of Americans that are becoming homeowners, one has to wonder how sustained the resurrection in housing prices will be. 


  1. This issue is becoming a bit of a conundrum and conflicts with the message being bantered about that "things are getting better." I have owned an apartment complex for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway.

    Today not only have many people shed the extra home many have doubled up with family or friends reducing the need for housing. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters. More on how low interest rates are hurting housing in the article below,


  2. Excellent, thoughtful and analytical post. Today's application for new home sales data, down 16% YoY, clearly substantiates your analysis