But Buyers Still Face Headwinds of High Prices and Low Inventory

  • It turns out last quarter’s surprise increase in the homeownership rate may be more than just a statistical blip. For the second consecutive quarter, the number of new owner-occupied households formed outpaced renters. Indeed we may have turned a corner when it comes to the steep dive in homeownership we’ve seen over the past 10 years.
  • The damage the Great Recession caused the U.S. homeownership rate may be finally reversing course. For the first time in recent memory, we have a statistically significant year-over-year increase in the homeownership rate.
  • While this is exciting news for champions of homeownership in the U.S., those looking to get into the door of homeownership still face strong headwinds. Prices are again outpacing rents, which makes homeownership less attractive, while the meager supply of homes on the market makes finding a starter home particularly daunting exercise.

The Census Homeownership and Vacancy Survey (HVS) released Thursday shows that U.S. homeownership increased over the year to an unadjusted rate of 63.7%, up slightly from 62.9% last year. Not only is this significant, but the change was a rare one that was statistically significant. There is more surprising news from this quarter’s report. For the only the second time in 11 years, and for the second consecutive quarter, the number of owner-occupied households grew faster than renter households over the year. The number of new owner households grew by more than 1,260,000 from a year ago, while renters lost over 702,000 households. Strong renter household formation is one of the reasons why the homeownership rate has continued to drop since the onset of the housing crisis. The fact that we now have two consecutive quarters where owner households outpaced renters is a strong sign this trend is reversing and that the homeownership rate bottomed out last year.

While this is exciting news for champions of homeownership in the U.S., those looking to get into the door of homeownership still face headwinds. Home prices are again outpacing rents, which makes homeownership less attractive, while the meager supply of homes on the markets makes finding a starter home a particularly daunting task.