After a decade in which essentially all household formation was among renters, the most recent homeownership data provides a faint signal that the market may be turning. Between Q2 2016 and Q2 2017, the number of owner households increased 1.7 percent while the number of renter households fell by 1.6 percent.
After a decade in which essentially all household formation was among renters, the most recent homeownership data provides a faint signal that the market may be turning. Between Q2 2016 and Q2 2017, the number of owner households increased 1.7 percent while the number of renter households fell by 1.6 percent.
The homeownership rate was essentially unchanged in the second quarter of 2017 according to the U.S. Census Bureau, holding in the range where it has spent much of the past two years. The non-seasonally adjusted homeownership rate edged 0.1 percentage point higher to 63.7 percent, reversing a similarly sized drop in Q1. And while the homeownership rate is up from the generational low reported a year ago (which was driven by an unusually strong surge in the number of renter households) it remains in line with the lowest homeownership rates of the 1980s and 1990s.
The most recent change in the homeownership rate resulted from a modest increase in the number of owner households (up by 84,000 households, or 0.1 percent) and a small decline in the number of renter households (down by 104,000 households, or 0.2 percent). This is unusual because the number of renter households historically jumps in the second quarter as new graduates enter the labor market: The number of renter households increased in seven of the 10 second quarters since 2006.
Regionally, the chasm between the country’s two major renter regions (the Northeast and the West) and the two major owner regions (the South and the Midwest) continued to widen. The homeownership rate edged lower in the Northeast (-0.2 percentage point, to 60.4 percent) and the West (-0.1 percentage point, to 58.9 percent). Homeownership increased in the South (+0.2 percentage point, to 65.5 percent) and the Midwest (+0.4 percentage point to 68 percent).
Reflecting these shifting market dynamics – as well as very high levels of multifamily construction activity – the number of rental units on the market hit a three-year high in Q2, jumping by 13.7 percent to 3.47 million. The national rental vacancy rate jumped by 0.3 percentage point as a result, to 7.3 percent, matching the recent high reported in 2015 Q2. This uptick in the national figure was largely driven by a surge in the rental vacancy rate in the West, from 4.7 percent to 6 percent. Still, rental vacancy is low by historic standards. There are fewer rental units on the market than during the mid-2000s, despite the fact that there are almost 10 million more renter households today compared to then.
But if inventory remains low on the rental side, it is practically at rock bottom among for-sale homes. Aside from the very lean years during the housing crash and in the early part of the recovery, for-sale inventory is as low as it has been in decades by some measures. That enough buyers are finding ways to overcome this limited selection and transition away from renting and into owning is a testament to just how strong a draw homeownership is right now for millions of Americans attracted by its promise of financial stability and domestic tranquility.
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