Saturday, November 01, 2014
US homeownership: Is the decline permanent?
Comments due by Oct. 8, 2014
THE homeownership rate in the United States plunged during the Great Recession. Many families lost their homes as prices collapsed and unemployment rose.
Now the economy is growing, and there are more jobs than ever. Home prices have risen, although they have not fully recovered.
But the homeownership rate continues to decline.
The Census Bureau reported this week that the rate fell to 64.3 percent in the third quarter, the lowest level since 1994. Since the second quarter of 2004, when the rate peaked at 69.4 percent, the number of homes owned by the people who live in them is virtually unchanged, but the number occupied by renters has risen by nearly 25 percent.
Just why that is — and whether it is a bad thing — is subject to debate.
Before the recession, it was a government goal, promoted by presidents of both parties, to get the ownership rate up. Homeowners were thought to care more, and thus maintain their homes better. They could profit from rising home prices, helping poorer people who bought homes improve their economic status. Changes in lending practices made it much easier for people to qualify for home loans, and soaring home prices made those who still rented appear to have passed up easy profits.
Whatever the reason — whether many people cannot afford to buy or whether a lot of them now fear the consequences of buying — the result has been a liftoff in rentals. And that has caused builders to put far more effort into apartment buildings than they had in recent years.
Of course, some apartments are sold as co-ops and condominiums, particularly in big cities, and some single-family homes are rented. But few builders build single-family houses hoping to rent them, while many multifamily properties are constructed with rentals in mind.
The accompanying charts show the trend in the homeownership rate since 1980, and the trends in a variety of housing measures since the homeownership rate peaked in 2004. Vacancies leapt in the recession, and while they have declined since 2009, the proportion of vacant units is still higher than it was before the recession began. That fact could be helping discourage single-family housing starts, which remain far below prerecession levels, even though multifamily starts have fully recovered.
In early 2006, less than 17 percent of new residences constructed were in multifamily buildings. Over the most recent 12 months, the proportion is more than twice that.