The seasonally adjusted homeownership rate fell for the 7th consecutive quarter to 63.8% in the 1st quarter of 2015, the lowest level in more than two decades. Homeownership peaked at 69.4% in the 2nd quarter of 2004.
The sharpest declines in homeownership over the last five quarters were concentrated in millennial and gen-X age categories; under 35 (likely 20 to 35) and 35 to 44 years, respectively.
Ownership amongst African Americans and Hispanics fell 1.4% and 1.7%, respectively, while White ownership eased 0.9% over this period.
Regionally, both the South and Northeast dropped sharply on a year over year basis, but relative to the 4th quarter, ownership in the Northeast fell a sharp 0.8% likely a result of increased seasonal foreclosure liquidation activity that has been concentrated in a handful of judicial states.
Though the foreclosure backlog has fallen significantly from its peak, it remains historically elevated and will result in additional transitions from ownership in the coming quarters that will weigh on the ownership rate.
First time buyers can increase the ownership rate, but their share remains low and will remain low until demand side issues and credit access improve. Return buyers are on the rise, though, and are estimated by NAR Research to add 1.5 million new owners to the market over the next five years, which could help to ameliorate the effect of continued transitions out of ownership.
The steady decline in ownership has directly contributed to the sharp decline in rental vacancy, which inched up 0.1% to 7.1%, the 2nd lowest rate in more than a decade. In turn, rent growth as measured by the consumer price index grew 3.5% over the 12-month period ending in March of 2015, outpacing owner’s equivalent rent growth of 2.7% over this same period. A trend that has held for several years making it more cost effective to own than rent in many housing markets.
Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.