Wednesday, 22 of November of 2017

Economics. Explained.  

Homeownership Rates

October 31, 2017

Homeownership edged upwards by 0.2% in the third quarter to 63.9%.  It hit a low of 62.9% in the second quarter of last year and has rebounded slightly.  It appears to have hit bottom.

The decline in homeownership in the past decade  has been across all age categories, but has been most pronounced amongst younger borrowers, i.e., those under the age of 45.

One factor contributing the decline in homeownership amongst our youth is the higher mortgage payment required to purchase a median-priced home which has risen 68% in the past five years risen from $612 in January 2013 to $1029 currently.  Many younger borrowers simply cannot afford those higher payments.

As home prices have risen the down payment required to purchase a median-priced home has risen from $34,200 to $52,500 in the same fiveyear time period.

At the same time many younger borrowers are saddled with a considerable amount of student debt which will negatively impact their ability to qualify for a mortgage.  Such loans have been climbing at a double-digit pace since the recession began in December 2007 and are, in fact, the only type of consumer credit that has risen significantly during that period of time.

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

While younger adults have been negatively impacted by higher home prices, the fact remains that mortgage rates are still very low at 3.9%  and home prices are still about 6.5% below their 2006 peak value.  With a robust pace of jobs growth, it is likely that the steady decline in homeownership has ended, although it is difficult to envision a significant rebound in ownership any time soon.

As many former homeowners and younger people turn to renting, vacancy rates for rental properties have been falling fast and at 7.5% are the lowest they have been since the mid-1900’s.  There continues to be a significant housing shortage in the United States.  This implies that home sales and prices will continue to climb.  The shortage of rental properties is especially acute so look for builders to shift construction from single-family homes into this highly sought category.

Stephen Slifer


Charleston, SC

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