Homeownership Rate Rises during Third Quarter of 2011

The US Census Bureau reported the seasonally adjusted homeownership rate registered a slight gain during the third quarter of 2011, increasing to 66.1 percent. Although this marks the first outright quarter-to-quarter increase since mid-2008, the homeownership rate is still at its lowest level since the second quarter of 1998 and 3.3 percentage points below the peak reading set back in mid-2004. On a non-seasonally adjusted basis, homeownership rates increased for all cohorts except for households headed by someone 35 to 44 years of age. As is the case with the national average, all age groups (except for the 65 and over cohort) have seen homeownership rates fall appreciably from their 2004/05 peaks; the major declines observed to date are -5.6 percentage points (pp) for the under 35 age group, 6.7 for the 35-44 cohort, -4.7 in the 45-54 age group and 3.8 points for the 55-64 cohort.

While the declines in homeownership rates among younger households are worrisome, and probably linked to some combination of individuals doubling up, moving back in with parents and/or going back to school, the slump in homeownership rates among older cohorts is problematic for the housing market. Indeed, the 45-54 and 55-64 age groups combined account for nearly half of owner-occupied households, so changes among these cohorts will have a significant influence on overall homeownership trends. Shrinking homeownership among these age groups suggests these households have been displaced by a foreclosure or another major negative economic event, i.e. job loss, and forced into new living arrangements—such as combining households with relatives. Fortunately, households within these age groups will likely re-enter the homeownership market more quickly than their younger counterparts once their economic circumstances improve.

The report also provides coverage of measures of the vacant housing stock. According to the results, the rental vacancy rate unexpectedly increased to 9.8%, but remains 50 basis points below its level from the third quarter of 2010. This result appears at odds with other reports that show a sustained tightening of supply in the U.S. apartment market; however, the recent volatility in the Census data might suggest this quarter’s result is just a temporary departure from this trend. The homeowner vacancy rate fell to 2.4%, which is its lowest reading since mid-2006.