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Commentary & Analysis

Led By Strong Demand By Millennials, Homeownership Rate Rises

By Cheryl Young | April 26, 2018
Homeownership hits 64.2% despite headwinds for millennial homebuyers
  • The homeownership rate continued its steady annual ascent to 64.2% in the first quarter of 2018 up from 63.6% this time last year, but unchanged from last quarter, in the face of fierce headwinds for homebuyers. While demand is buttressed by healthy consumer fundamentals such as low unemployment and robust job growth, chronically low inventory and skyrocketing prices plagues the housing market.
  • Millennials have emerged as the most dogged homebuyers with those under 35 far outpacing the overall annual homeownership rate change, despite contending with the most vexing portion of the housing market. Millennials make up the largest share of those seeking starter homes, a portion of the market that saw inventory plummet 14.2% and prices leap nearly 10% year-over-year in Q1 2017.
  • The homeownership rate climbing out of its 50-year low should be seen as an opportunity for builders in the for-sale space. The sharp increase in renter households coming out of the Great Recession has finally begun to moderate as older millennials and Gen Xers shift into homeownership, presenting a boon for new construction in a tight inventory environment, and with vacancy rates in ownership properties dipping to 1.5%.

The U.S. homeownership rate rose in the first quarter of 2018 at 64.2% (not seasonally adjusted) up from 63.6% this time last year, but unchanged from the previous quarter, according to Thursday’s U.S. Census Homeownership and Vacancy Survey data release.

Strong demand boosted by healthy economic fundamentals have been winning over daunting headwinds such as skyrocketing prices and scarce supply. Indeed available homes to both buy and rent are in short supply; the homeownership vacancy rate is the lowest has been hovering at lows unseen since 2001 and this quarter registered at 1.5%, down from 1.6% last quarter. Rental vacancies have also remain relatively low remaining steady at 7.0% a year ago. Despite these challenges, millennials led the charge in increases in homeownership, with a 2.92 point annual increase in the homeownership rate compared to a 0.94 point annual increase overall.

While homeownership rate growth among millennials injects optimism into the housing market in the long wake of the Great Recession, there are groups that continue to struggle to recover. Black homeownership is 85.9% of its pre-recession peak, lagging behind both the Hispanic (96.6%) and white (95.0%) homeownership rates as share of pre-recession peaks. This disproportionate impact of the housing crisis on communities of color linger and manifests in the slow recovery of the homeownership rate.