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U.S. homeownership stabilizes after long decline

After sliding for more than a decade and hitting a low point in 2016, the U.S. homeownership rate appears to be on an upswing. 

The overall rate stood at 64.2 percent in the first quarter, unchanged from the fourth quarter, but up by 60 basis points year over year. The rate has increased year-over-year for five consecutive quarters. Homeownership bottomed out in the second quarter of 2016, at 62.9 percent, or 63.1 percent seasonally adjusted.

homeownership“Last year was the breakout year for homeownership,” said Ralph McLaughlin, founder and chief economist of the California-based Veritas Urbis Economics.

“I think we will continue to see year-over-year gains in the homeownership rate probably at least through the remainder of this economic cycle,” McLaughlin said during an interview.  

McLaughlin said multifamily owners should be concerned by the latest numbers from the U.S. Census Bureau, however.  

“This is the fourth consecutive quarter where the number of renters in the United States has actually declined,” McLaughlin said. “That is a sign that demand on the rental side of the market may be softening. If that is the case, we may see flattening rents throughout the remainder of the year into the following year.”

Millennial homeownership falls 

The homeownership rate for millennial buyers under the age of 35 fell by 70 basis points in the first quarter, to 35.3 percent. Ratiu said first-time buyers are being squeezed by a shortage of available entry-level homes, rising prices and higher interest rates.

“It is not surprising to see the homeownership rate for that demographic group slide,” said George Ratiu, director of quantitative and commercial research for the National Association of Realtors. “The question is whether this is just a temporary change, or is this going to become a trend? That remains to be seen.”

Ratiu was optimistic, however, that the millennial homeownership rate would pick up in subsequent quarters.The homeownership rate for this age group has been rising and, despite the quarterly decline, remained 1 percentage higher year over year as of the first quarter of this year.

“From our surveys of consumer activity, the millennials comprised the largest share of buyers currently active in the market,” Ratiu said.  

Minority homeownership rates rose in the quarter. The Hispanic homeownership rate jumped 1.8 percentage points over the quarter, to 48.4 percent, which was the highest Hispanic homeownership rate since the first quarter of 2010, U.S. Census Bureau data indicates.

According to the National Association of Hispanic Real Estate Professionals (NAHREP), the Hispanic population grew by 1 million in 2017, accounting for 51 percent of U.S. population growth. Hispanics also recorded gains in household formations and workforce participation.

“The spike in the Hispanic homeownership rate in the face of inventory shortages and rising interest rates demonstrates the resilience and overall strength of the Hispanic market,” NAHREP President Daisy Lopez-Cid said.

The black homeownership rate rose by 10 basis points, to 42.2 percent, over the quarter. The rate for white households was 72.4 percent, down 30 basis points quarter over quarter as of the first quarter. 


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