Tuesday, 22 of January of 2019

Economics. Explained.  

Homeownership Rates

November 26, 2018

Homeownership edged upwards by 0.1% in the third quarter to 64.4%.  It hit a low of 62.9% in the second quarter of 2016 but has been climbing steadily for the past two years.

The upswing in homeownership in the past two years  has been most pronounced amongst younger borrowers, i.e., those under the age of 45.  That is where most of the earlier decline occurred.

Higher home prices and somewhat higher mortgage rates have caused the monthly mortgage payment required to purchase a median-priced home to rise steadily.

The same thing is true for the down payment required to purchase a median-priced home.

While higher home prices and higher mortgage rates have made homeownership less affordable than it used to be, housing still remains quite affordable for most.  The National Association of Realtors index of housing affordability stands at about 145.   At a level of 145 it means that consumers have 45% more income than is required to purchase a median-priced home.  Back at the peak of the housing boom in 2007  consumers had just 14% more income than required.  Thus, despite higher home prices and rising mortgage rates, housing remains quite affordable for most because of the steady growth in consumer income.

Also, the very limited supply of homes available to purchase means that some potential home buyers simply cannot find a suitable property to purchase.

Many former homeowners and some younger people have turned to renting, but vacancy rates for rental properties have been falling fast and at 7.1% are the lowest they have been since the mid-1980’s.  There continues to be a significant housing shortage in the United States.  This implies that home sales and prices will continue to climb.

Stephen Slifer


Charleston, SC

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