Homeownership Rate at 64% for First Time in Four Years

Although the Census Bureau does not consider the data to be “statistically different,” the U.S. homeownership rate topped 64 percent in the fourth quarter for the first time since 2014.

The Bureau’s quarterly report on residential vacancies and homeownership placed the nation’s homeownership rate at 64.0 percent in the fourth quarter. The last time the rate was above 64 percent was third quarter 2014 (64.3 percent); since then, it fell to a recent historic low of 63.1 percent in second quarter 2016 before gradually rising over the past six quarters.

The Bureau said 2017 marked the first year the homeownership rate grew in all four quarters since 2004.

The report said national vacancy rates in the fourth quarter were 6.9 percent for rental housing and 1.6 percent for homeowner housing. The rental vacancy rate of 6.9 percent was virtually unchanged from the rate in the fourth quarter 2016 (6.9 percent) and 0.6 percentage points lower than the rate in the third quarter (7.5 percent). The homeowner vacancy rate of 1.6 percent was 0.2 percentage points lower a year ago.

Despite the comparative milestone, Census was not impressed. “The homeownership rate of 64.2 percent was not statistically different from the rates in the fourth quarter 2016 (63.7 percent) or the third quarter 2017 (63.9 percent),” it said in a statement.

However, Ralph McLaughlin, chief economist with Trulia, San Francisco, said the upward trend reflects solid economic fundamentals, such as low unemployment and an aging pool of house-hungry millennials, that will likely persist throughout the remainder of the year.

“What’s even more positive news for the housing market is that much of the increase in the homeownership rate over the past year has come from 18 to 44-year olds,” McLaughlin said. “Increases in homeownership amongst these two cohorts are a sign that the scars of the Great Recession are finally starting to heal and provide a source of optimism that the owner-occupied segment of the housing market will continue to grow throughout the remainder of this economic cycle.”

The Census report said fourth quarter rental vacancy rates were higher outside Metropolitan Statistical Areas (7.9 percent) than in the suburbs (6.2 percent), but not statistically different from the rate inside principal cities (7.3 percent). The homeowner vacancy rate was higher outside MSAs (2.0 percent) than in the suburbs (1.5 percent), but not statistically different from that rate inside principal cities (1.6 percent).

The report said fourth quarter rental vacancy rates were highest in the South (8.8 percent), followed by the Midwest (7.6 percent), Northeast (5.5 percent) and West (4.5 percent). The homeowner vacancy rate was higher in the Northeast (2.0 percent) than in the Midwest (1.5 percent) and West (1.1 percent), but not statistically different from the rate in the South (1.7 percent).

Census reported 87.8 percent of housing units in the United States were occupied in the fourth quarter; 12.2 percent were vacant. Owner-occupied housing units made up 56.4 percent of total housing units, while renter-occupied units made up 31.4 percent of the inventory in the fourth quarter. Vacant year-round units comprised 9.3 percent of total housing units, while 2.9 percent were for seasonal use. The report said 2.3 percent of the total units were for rent, 0.9 percent were for sale only and 0.7 percent were rented or sold but not yet occupied. Vacant units that were held off market comprised 5.3 percent of the total housing stock–1.6 percent were for occasional use, 1.0 percent were temporarily occupied by persons with usual residence elsewhere and 2.8 percent were vacant for a variety of other reasons.

“While this is exciting news for proponents of homeownership, those looking to get into the door of homeownership still face headwinds,” McLaughlin said. “Home prices outpaced rents in each month of 2017, making homeownership more difficult to achieve for those looking to buy instead of rent, and the plunge in inventory makes it increasingly difficult for potential homebuyers to find housing that suits their needs.”