Don’t Be Alarmed: Home Ownership Dips Again

July 29, 2015

The U.S. home ownership rate continued to fall in the second quarter, reaching a 35-year low, according to a new Commerce Department report. The seasonally adjusted home ownership rate dropped to 63.5 percent, falling even further from its peak in 2004 at 69.4 percent.

However, economists are upbeat that a change is on the horizon.

"The trend is not going to continue. We think that the home ownership rate is close to bottoming out, but we don't expect it to start rising substantially before 2017," Andres Carbacho-Burgos, a senior economist at Moody's Analytics in West Chester, Pa., told Reuters. Carbacho-Burgos credits a tightened labor market as one major reason for optimism, with the unemployment rate at a seven-year low of 5.3 percent and nearing the 5 percent range that most economists consider full employment.

The improvement in the job market will help boost wages, which will then have the trickle effect of bringing in more first-time buyers into the housing market.

The job market has already helped to lift household formation, but most of that has been centered in the rental market. The residential rental vacancy rate dropped to 6.8 percent in the second quarter, the lowest since 1985.

The home ownership rate in the second quarter rose among Americans aged 35 years and younger. However, the rate fell for every other age group.

"As the millennials age, it's expected they will start buying more homes and hopefully this is a sign that this trend is beginning," says Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

Source: “U.S. Home Ownership Hits 35-Year Low, Renting in Vogue,” Reuters (July 28, 2015)