Rapid Reaction: Q2 Homeownership Rate

• The U.S. homeownership rate edged higher to 63.7 percent in Q2 from 63.6 percent in Q1 and 62.9 percent a year ago, according to the U.S. Census Bureau, as more renters likely transitioned into homeowners (the change was not statistically significant).
• The U.S. rental vacancy rate rose to 7.3 percent from 7 percent a quarter ago and 6.7 percent a year ago, driven by a sharp jump in rental vacancies in the West.
• Black and Hispanic homeownership both rose year-over-year, but fell compared to Q1.

Despite very little for-sale inventory, intense competition and worsening affordability, hundreds of thousands of renters are finding ways to transition into homeownership, pushing the national overall U.S. homeownership rate up alongside the national rental vacancy rate. Equally encouraging, many new homeowners in Q2 appear to be young, likely first-time home buyers -- the homeownership rate among those 35 and younger rose strongly in Q2 and now stands above 35 percent, its highest level since 2015. There were roughly 84,000 new homeowner households created in Q2, accompanied by a decrease of 104,000 renter households, which suggests that not only are many renters becoming homeowners, but that many are also coupling up, too. Black and Hispanic homeownership rates, which lag behind white and Asian rates by large margins, were both up compared to a year ago, which is encouraging, though they fell compared to Q1. There are now more homeowners in the United States than at any time since 2009. Builders have been focused on adding more rental supply in recent years, which is beginning to show up in spades -- there are more rental properties on the market now than at any point since early 2014, though the biggest increases in rental inventory have been among highly priced units. On the other side, the number of for-sale properties continues to decline. As the rental market becomes more saturated and vacancies keep climbing, there is some hope that builders may begin to re-focus their attention on the for-sale segment, a potential boon for those renters that likely want to buy and would if they could, but haven't been able to find the right home for them given incredibly tight inventory. New home sales data, reported yesterday, suggest that new home construction is gradually inching upward. In general, this report serves to reinforce the fact that home buying demand is incredibly high right now, and that there is plenty of runway ahead to see the homeownership rate continue to grow. We may never get back to the homeownership highs experienced during the bubble years, but a strong labor market and high rents are certainly making homeownership very attractive to many Americans.