Temporary Blip? Homeownership Rate Dips for First Time in 2 Years
April 26, 2019
Rising home prices and a wobbling economy may have spooked some Americans in the first quarter of the year. For the first time in more than two years, the U.S. homeownership rate fell, dropping to 64.2 percent in the first quarter of 2019 from 64.8 percent in the fourth quarter of 2018, according to newly released data from the Census Bureau.
The homeownership rate has been on an upswing since the start of 2017 and nearing its historic average of about 65 percent, The Wall Street Journal reports. So the latest quarter’s dip has captured headlines.
Higher home prices and lower housing inventories may have attributed to the slight dip in households, economists say. Younger buyers have been driving the bulk of the rise in the homeownership rate for the last few years, but they posted some of the most significant drops in the first quarter. The homeownership rate of households headed by those under 35 years old dropped from 36.5 percent to 35.4 percent in the fourth quarter.
“The homeownership rate is volatile, and it would take several straight quarters of decline to indicate owning a home is once again in decline in the U.S.,” The Wall Street Journal reports. “While the homeownership rate fell over the quarter, it was virtually unchanged from a year earlier.”
The number of owner households in the first quarter rose by about 1 million, Census data shows.
Mortgage rates also have since dropped from yearly averages, and that could bring more Americans into homeownership. Average mortgage rates for a 30-year fixed-rate loan have fallen from nearly 5 percent in the fall of 2018 to just over 4 percent now.
Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, told The Wall Street Journal he believes the first-quarter drop in the homeownership rate is a temporary blip. Millennials are entering their early- to mid-30s and showing more eagerness to buy homes.
“We had a really, really volatile end of 2018,” Kan told the Journal, referencing stock market swings and fears then about a slowing economy. “Most of these [younger] borrowers are going to be in tighter financial circumstances. They are going to be more vulnerable to big swings.”
“Homeownership Rate Drops for First Time in More Than Two Years,” The Wall Street Journal (April 25, 2019) [Log-in required.]
Updated: June 27, 2019