The home-ownership rate in the United States climbed in the second quarter of 2017 to 63.7%. This suggests the downward spiral in home ownership after the Great Recession is starting to reverse. The increase was almost a full percentage point from 2016, when the number hit a low all time of 62.9%. The number of Americans who own has been rising ever since.
According to the chief economist at Trulia.com, the damage from the last recession is starting to reverse course, but there is still a long way to go. He noted the quarterly home-ownership reports can be quite volatile, but several factors are showing good improvement.
First, the number of new owner households was more than new renter households for the second quarter in a row. More than 1.26 million new homeowner households formed since mid-2016. There were 702,000 fewer home that were being rented than a year earlier. There also are more homeowners in the US since 2009, noted the chief economist at Zillow.
This fact is not going to bode well for landlords. They are finding themselves fighting a flood of supply that is increasing their vacancy rates and keeping growth in rents low in much of the country. The vacancy rate across the country increased to 4.4% for the second quarter of 2017, which was a rise of .2% from a year ago.
It is thought the rental market is getting more saturated and vacancies are rising. Thus, there is hope that home builders may start to focus more on homes for sale which will help renters who want to buy their first home.
Generally, the increase in hom-eownership is good news for the US economy. This is causing a boom in new home construction that is raising the wages of many workers in the construction industry. It is likely that builders will continue to increase production of new, less expensive homes to meet rising demand from new home buyers.
The homeownership rate for homes with people under 35 is still low at only 35.3%, but this is up from 34% a year earlier. It is likely that more demand will put more pressure on home prices unless more supply appears to meet it.
Why Is Home-ownership Still Depressed?
It is clear that home-ownership is on the rise in the US, but we have a long way to go to getting back to a time when home-ownership was at nearly 70%. Some of the reasons that home-ownership is still struggling somewhat includes the following reasons:
- During the last financial crisis, there were millions of people who lost their homes. Nearly nine million homeowners went through a foreclosure. There also were 8.7 million people who lost work. Many young people saw their family and friends suffer through this and many millennials today are still skeptical of home-ownership. But it is likely this feeling will dissipate with time as young people get married and have children of their own.
- Mortgage financing. Credit standards are easier than they were a few years ago, but it is more common for people with lower credit scores to be denied a mortgage. Also, 100% financing loans are no more, so you almost always have to have a down payment, although 3.5% down payments are commonplace with FHA and some conventional loans.
- Student loan debt. Younger households are saddled with billions of dollars of student loans. This means many millennials are paying $200 or $400 or more per month for a student loan. This makes it harder to save for a down payment and afford a mortgage.
- Home affordability. As the economy is getting stronger, it is harder for younger people to afford to buy their own home. It can be especially challenging for people in California, Washington state and New York and New Jersey to be able to afford the much higher prices of those regions.
- Shortage of homes. In some of the faster growing cities in America, it can be difficult to find enough affordable homes in the 150k to 300k range that many middle-class buyers can afford.
There is no doubt that the level of home-ownership dropped in the years after the Great Recession. It was harder for many families to find work, save for down payments, and many also were dealing with serious credit problems in the wake of job loss and financial issues. But it is encouraging that home-ownership is beginning to rise again. It is hoped that as the economy expands in 2018 and 2019 that it will be easier for people to afford to save for a down payment and to qualify for a mortgage. Owning a home is still the best choice for most people in the long term, and it leads to more prosperous and stable communities.
References: Retrieved from Homeownership Rate Jumps from 50 Year Low.