Ten-Year Declining Homeownership Rate Streak Finally Broken in 1Q17

Friday, May 5, 2017 by Zelman & Associates

According to the most-frequently cited measure of homeownership produced quarterly by the Census Bureau, the decade long slide in the national homeownership rate just ended. For 1Q17, 63.6% of households were owners versus renters, up 10 basis points from 1Q16. This compares to year-over-year declines of 10 basis points in 4Q16 and 30 basis points for all of 2016. In fact, while marginal, the first quarter increase was the first since 3Q06.

Digging deeper into the specifics, we are encouraged that the reported improvement was broad-based across age cohorts. For instance, half of the 12 age ranges detailed by the Census Bureau witnessed a higher homeownership rate than this time last year, tied for the largest share since 1Q05. While a minor percentage of households, the increase was led by those under 25 years old (up 220 basis points), followed by 45-49 year olds (up 180 basis points) and 35-39 year olds (up 130 basis points). Households aged 60-64, 70-74 and 25-29 also posted increases.

We are always cautious not to overemphasize quarterly data points from the Census Bureau, particularly as the sample size shrinks when looking at age cohorts, but we believe that the aggregate picture is strongly suggestive of a bottoming homeownership rate.

It was only nine months ago that news headlines warned that the “Homeownership Rate in the U.S. Drops to Lowest Since 1965”, detailing affordability constraints, student debt, tight credit and a preference to rent or live in urban environments among the primary reasons for the multi-decade lows. Having considered all of these moving variables in our own research, we believe that these often-discussed secular challenges have been extrapolated too far. We quite simply believe that family formation drives demand for single-family assets, and to the extent that incomes allow, the overwhelming preference is still for owning over renting. Quarterly volatility aside, we anticipate that national homeownership rates are more likely to be higher than lower over the next year.

Ten-Year Declining Homeownership Rate Streak Finally Broken in 1Q17

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