Changing Homeownership Rates in America

The latest housing data release from the U.S. Census Bureau contains some interesting data on the housing and residential rental market in the United States.  For this posting, I will be concentrating on the data showing the homeownership landscape for the first quarter of 2013.

Here is the lead-in graph showing both rental and homeowner vacancy rates for the nation from 1995 to 2013:

In the first quarter of 2013, homeowner vacancy rates were 2.1 percent, down 0.1 percentage point from the same quarter in 2012 but up 0.2 percentage points from the previous quarter.  The homeowner vacancy rate peaked at 2.9 percent in the first and fourth quarters of 2009, the highest rate since 1995.  Vacancy rates varied greatly by region with southern states having the highest rate of 2.5 percent compared to western states which had the lowest rate of 1.5 percent.

Key to the current housing market is the asking price for vacant housing as shown on this graph:

The nationwide median asking price in the first quarter of 2013 was $139,800, down 30 percent from the peak of just over $200,000 seen back in early 2007.

According to the Census Bureau, there are now 132.596 million housing units in the United States of which 18.439 million are vacant.  Of these vacancies, 13.970 million are vacant year-round, 7.609 million are "held off market", 1.609 million are for sale and 4.469 million are seasonal.  On a year-over-year basis, there has been very little change in the number of vacant housing units of all types.

Here is a graph showing how the homeownership rate in the United States are changing:

Homeownership (not seasonally adjusted) peaked at 69.2 percent in 2004 and has fallen back substantially to its current level of 65 percent, the lowest rate since the second quarter of 1995.  In one year alone, homeownership rates have fallen by 0.5 percentage points and have dropped by 2.6 percentage points since the end of the Great Recession.

Again, as in the case of homeowner vacancy rates, homeownership rates vary greatly across the United States.  In the first quarter of 2013, homeownership rates were highest in the Midwest at 70 percent and lowest in the west at only 59.4 percent.  Homeownership rates in the Midwest have barely budged since 2007, peaking at 72.2 percent in 2007.  On the other hand, homeownership rates in the west have fallen  by 4.7 percentage points from the peak in early 2007, more than twice the drop seen in the Midwest.

Who are the Americans that own their own homes?  Only 36.8 percent of Americans under the age of 35 live in their own home (peaked at 42 percent), 60.1 percent of Americans between the ages of 35 and 44 live in their own homes (peaked at 68.3 percent), 71.3 percent of Americans between the ages of 45 and 54 live in their own homes (peaked at 75.8 percent) and 77 percent of Americans between the ages of 55 and 64 live in their own homes (peaked at 81.1 percent).  We can quite quickly see that Americans between the ages of 35 and 44 were most likely to have lost their homes between 2007 and now with a drop in homeownership of 12 percent over the six year period.  Unfortunately, the trend is showing that this age group is still experiencing a drop in the rate of home ownership.

Lastly, let's look at home ownership rates as they relate to household income level.  In the first quarter of 2013, 80 percent of households with incomes grater than or equal to the national median family income owned a home whereas only 50 percent of households with family incomes less than the national median owned a home.  Homeownership by families with above median income peaked at 83.5 percent in early 2007 and homeownership by families with below median income peaked at 52.2 percent in early 2010. 

It appears that the tighter mortgage markets and the difficulty that many potential home buyers face when trying to save a downpayment are having an impact on America's housing market despite the fact that we have Mr. Bernanke to thank for generationally low mortgage interest rates.  The stubbornly high unemployment rate (when 7.5 percent looks "good", you know the economy is not strong) would certainly appear to be providing a barrier to homeownership.  That said, perhaps the economy is now "searching" for a more healthy and sustainable rate of homeownership than America experienced during the housing boom of the mid-2000s.  Unfortunately, for millions of current homeowners who find themselves underwater, the odds of finding the value of their home increasing to the levels seen in 2006 and 2007 are slim as homeownership rates decline.