Will This Halt the “Renter Nation” War Cries?

Friday, July 28, 2017 by Zelman & Associates

Last week, Pew Research Center published a short analysis titled “More U.S. households are renting than at any point in 50 years”, which caught numerous media headlines and fed the rhetoric among those that believe the homeownership rate and “the American Dream” will remain under structural pressure for the foreseeable future.

We were initially surprised by the media attention only in that the data were simply the inverse of the homeownership rate and previously-released stats already confirmed that the national homeownership rate, as measured by the Census Bureau’s Housing Vacancies and Homeownership survey, in 2016 (63.4%) was at the lowest level since 1965 (63.0%). In essence, this was old news.

More importantly, new news, released yesterday by the Census Bureau, pointed to the national homeownership rate rising year over year for the second consecutive quarter. In 2Q17, unadjusted for seasonality, the ownership rate of 63.7% was up 80 basis points from 2Q16. Importantly, back-to-back quarters of year-over-year growth has not happened since 3Q06, with this quarter’s increase the largest since 2Q04.

The breadth of the improvement was also encouraging. In the quarter, the year-over-year increase was evident in eight out of 12 age cohorts, which has not been seen since 1Q05 and is in stark contrast to 1Q15 when each of the 12 cohorts were down year over year. Importantly, the reported improvement was led by 25-29 year olds (220 basis points) while the six youngest age brackets up to 45-49 year olds improved. Higher homeownership rates were also posted across each race and region of the country, as well as in both urban and suburban locations.

On a seasonally-adjusted basis, the homeownership rate averaged 63.8% in 1H17. If that holds through the remainder of the year, which we believe is likely, 2017 would stand higher than both 2016 (63.4%) and 2015 (63.7%). We previously argued “Why We Believe the Homeownership Rate Has Bottomed”, including our views on fading foreclosure dynamics, emerging family formation among young adults and the aging of the population. While the debate between “Renter Nation” and “the American Dream” is unlikely to disappear anytime soon, we are glad that we have sided with the latter.

Will This Halt the “Renter Nation” War Cries?

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