Homeownership Rate Increases In Third Quarter But Remains Low

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It rose 0.6 percentage points from last quarter, when it was at a 51-year nadir

October 28, 2016

Photo: Predi/Creative Commons

The homeownership rate in the U.S. dropped to 62.9 percent last quarter, a 51-year low. A spike in new homeowners is helping to reverse that.

CNBC reports that the homeownership rate increased to 63.5 percent this quarter, which is still significantly down from a high of 69.2 percent during the height of the housing boom.

Household formation jumped by more than 1.1 million last quarter, about 560,000 of which were new owner households. For comparison, 944,000 new rental and owner households formed last quarter.

The low homeownership rate is driven by many factors. One, younger adults have found that renting better suits them, because it is less expensive than buying (up front, at least) and it provides flexibility. Also, the housing supply is low, especially for entry-level homes. Millennials make up the largest pool of new households, and many experts believe they still want to own a house in suburbia one day.

"First, they will rent, and as they settle down, then they will buy” said Ralph McLaughlin, chief economist at Trulia. “While we can't know for sure if they will own at rates of older generations, our survey work at Trulia shows 80 percent of millennials want to own a home — the highest share of any cohort and the highest in the seven years we've run the survey."

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