Consumer Credit Rises in November

January 10, 2014

Data released by the Federal Reserve Board indicates that consumer credit outstanding rose at a seasonally adjusted annual rate of 4.8% in November. The amount of consumer credit outstanding now totals $3.1 trillion.

The November expansion of consumer credit outstanding mostly reflects a 6.4% increase in non-revolving debt. Non-revolving debt outstanding, which is largely composed of student loan and auto debt, now totals $2.2 trillion. Revolving debt, which is largely composed of credit cards, also contributed to the expansion in total consumer credit outstanding, rising by 0.6% over the month of November. There is $857 billion in revolving credit outstanding.

An earlier post illustrated that the rise in student loan debt largely accounts for the expansion in total consumer credit outstanding. As Figure 1 illustrates, the expansion of student loan debt outstanding coincides with an increase in the amount of student loan debt that is 90 or more days delinquent, considered serious delinquency. Seriously delinquent student loan debt is rising partly because the amount of student loan debt outstanding is growing. But as Figure 2 illustrates, the rate of serious delinquency is also increasing. In recent quarters the serious delinquency rate has spiked, even as the serious delinquency rate for other consumer credit products has declined.

In the fourth quarter of 2011, the share of outstanding student loan debt that was seriously delinquent stood at 8.5%. One year later, that share rose to 11.7%. It is currently 11.8%. At the same time, the shares of seriously delinquent auto and credit card debt are falling from their recession-era highs. Figure 3 illustrates that the amount of seriously delinquent student loan debt is now nearly twice the amount of seriously delinquent credit card debt and roughly 4 times the amount of auto loan debt.

A rising serious delinquency rate will limit homeownership among younger households. According to the Federal Reserve Bank of New York (see p. 18 of linked .pdf), student loan borrowers between the ages of 25 and 30 that are seriously delinquent on their student loan debt typically account for less than 2.0% of new mortgage originations extended to student loan borrowers in this age cohort.

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Homeownership Rate Unchanged

November 5, 2013

The homeownership rate remained unchanged at a seasonally adjusted reading of 65.1% during the third quarter of 2013 according to Census data. The reading is below its 20-year historical average of 66.9% and 4.3 percentage points below the peak reading of 69.4% in the second quarter of 2004. However, the flat reading follows three consecutive quarters of decline.

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Homeownership increased over the second quarter of 2013 for all age groups except households headed by those aged between 55 and 64 years, who saw a decline of 0.5 percentage points. For the most recent reading, the largest percentage point increase from last quarter occurred for households headed by those aged between 35 and 44 years, who saw an increase of 0.8 percentage points. Over the coming years, this age group and the under 35 cohort are key population segments to watch. It will be important to distinguish cyclical (business cycle based) declines and recoveries versus long-term structural changes on the views of homeownership for this age group.

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Across regions, homeownership mostly remained flat or declined versus the third quarter of 2012. For the most recent reading, the largest year-over-year percentage point decline in homeownership occurred in the West (0.6 percentage points). The West historically has the lowest homeownership rate among all four regions. The homeownership rate for the most recent quarter is 59.5% in the West versus a homeownership rate of 69.6% in the Midwest.

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The Census Bureau’s quarterly survey also provides estimates of vacancy rates among the stock of owner and rental housing.

The rental vacancy rate increased slightly in the third quarter of 2013 after two consecutive quarters of decline. The current reading is 8.3% or 10 basis points above last quarter. On a 4-quarter moving average basis, the rental vacancy rate remains at its lowest reading since the end of 2001.

The homeowner vacancy remained unchanged compared to the third quarter of 2012, with the 4-quarter moving average of 1.9%, the lowest rate since mid-2006.

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Homeownership Down Slightly

July 30, 2013

The homeownership rate declined slightly during the second quarter of 2013, falling to a seasonally adjusted reading of 65.1% according to Census data. This marks a 4.3 percentage point decline versus the peak from mid-2004.

While the homeownership rate is somewhat lower than its 20-year historical average of 66.9%, the rate has not fallen as low as some analysts anticipated, due in part to a sluggish pace of new household formations. In other words, though the numerator (owner-occupied households) has fallen, still-slow growth in the denominator (total occupied households) has kept the homeownership rate from falling lower.

homeowner rate

Across age groups, homeownership mostly remained flat or declined versus the second quarter of 2012. For the most recent reading, the largest year-over-year percentage point decline in homeownership occurred for households headed by those aged between 35 and 44 years (1.9 percentage points). Each of the householder cohorts have registered declines in the homeownership rate since peaking around the mid-2000s, but the largest declines have been for those 44 and younger.

homeownership by age

The Census Bureau’s quarterly survey also provides estimates of vacancy rates among the stock of owner and rental housing.

The rental vacancy rate continued its downward trend during the second quarter of 2013, declining 40 basis points from a year ago to 8.2%. On a 4-quarter moving average basis, the rental vacancy rate has dropped to its lowest reading since the end of 2001.

The homeowner vacancy rate dipped 20 basis points compared to the second quarter of 2012, with the 4-quarter moving average falling to 1.9%, the lowest rate since mid-2006.

vacancy rates


Homeownership Rate Inched Lower During the First Quarter

May 1, 2013

The homeownership rate declined slightly during the first quarter of 2013, falling to a seasonally adjusted reading of 65.2%. This marks the lowest reading since the end of 1995 and a 4.2 percentage point drop versus the peak observed in mid-2004. While the homeownership rate is somewhat lower than its 20-year historical average, the rate has not fallen as low as some analysts anticipated, due in part to a sluggish pace of new household formations. In other words, though the numerator (owner-occupied households) has fallen, still-slow growth in the denominator (total occupied households) has kept the homeownership rate from falling lower.

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Across age groups, homeownership rates either remained flat or declined versus the first quarter of 2012. The largest percentage point decline in the homeownership rate occurred within the group of households headed by someone aged between 35 and 44 years (1.3 percentage points), followed by a 0.8 percentage point decline within the 55-64 householder cohort. Each of the householder cohorts have registered declines in the homeownership rate since peaking around the mid-2000s, but the relative degree of contraction across cohorts has been evident.

homeownership

Householders aged between 35 and 44 years have experienced the largest decline in homeownership rates, falling ten percentage points in the past eight years and reaching an all-time recorded low of 60.1% during the first quarter of 2013. By contrast, the homeownership rate for households headed by someone 65 years or older is currently 1.4 percentage points below its peak and has remained above 80% in all but two quarters since the second half of 2007.

The continuing slide in homeownership rates among the 35 to 44 and under 35 householder age groups are a concern for longer-term housing demand going forward, fluctuations within the 45-54 and 55-64 cohorts will affect the outlook with greater immediacy. Combined, these cohorts are the largest groups of homeowners and represent a primary source of “move-up” demand, whereby current owners trade their existing homes for newer and/or larger living spaces. The rate at which householders in these age groups become homeowners (again, in most cases) will be an important part of the housing market’s overall recovery.

vacancy rate

The Census Bureau’s quarterly survey also provides estimates of vacancy rates among the stock of owner and rental housing. The rental vacancy rate continued its downward trend during the first quarter of 2013, declining 20 basis points from a year ago to 8.6%. In addition, on a 4-quarter moving average basis, the rental vacancy rate dropped to its lowest reading since the end of 2001. The homeowner vacancy rate dipped 10 basis points compared to the first quarter of 2012 and has held steady at a 4-quarter moving average of 2% in each of the last two quarters. In addition, the homeowner vacancy rate has trended significantly lower since the toughest days of the housing market downturn and remains in range of levels occurring prior to the boom and bust period.


Homeownership Rate Slips during the Third Quarter

October 31, 2012

The Census Bureau reported the seasonally adjusted homeownership rate fell to 65.3% during the third quarter of 2012. In terms of rates across age groups (which are not seasonally adjusted), only those households headed by persons 65 and over registered an increase in the homeownership rate versus the third quarter of 2011. The under 35 and 55-64 householder cohorts saw the largest declines, with each showing a 1.7 percentage point drop-off in the homeownership rate compared to a year ago.

With the homeownership rate dropping to its lowest reading since the first quarter of 1996, it stands to reason that many of the underlying householder age groups have rates hovering at very low levels. Indeed, the homeownership rate among householders under 35 years of age is now at its lowest level on record at 36.3%–a 7.3 percentage point decline from its peak reading back in mid-2004. However, the largest percentage point decline for any particular homeowner cohort was among the 35-44 age group, as the homeownership rate remains 8.7 points lower compared to its cyclical peak.

Recent trends in homeownership rates among the younger age groups are concerning, and could affect the dynamics of homeownership over the long term—particularly if many of these individuals do not transition back from renters to buyers. Homeownership rates among the 45-54 and 55-64 cohorts will have a larger influence on the near-term outlook, since these two age groups are the largest blocks of homeowners. With the pace of job growth expected to pick up modestly going forward, household formations among these two specific cohorts should recover, including those households that were lost as deteriorating financial circumstances and/or some negative economic event (e.g. home foreclosure) forced people into combined living arrangements.

The homeownership rate is only one feature of this Census Bureau report, as it also provides data on trends in the vacant housing stock. The rental vacancy rate held steady at 8.6% during the third quarter, tying last quarter’s mark as the lowest reading on the rental vacancy rate since mid-2002. NAHB’s own Multifamily Vacancy Index revealed continued tightening of apartment supplies during the second quarter of 2012, though at a slightly lower pace. The homeowner vacancy rate declined to 1.9% during the third quarter of 2012, its seventh consecutive quarter-to-quarter decline and lowest level in 7 years.


Homeownership Rate Drops to Lowest Point in 15 Years

April 30, 2012

After hovering around 66 percent in each of the last three quarters, the Census Bureau reported the seasonally adjusted homeownership rate fell to 65.5 percent during the first quarter of 2012. With this latest decline, the homeownership rate has slipped nearly 4 percentage points from its peak during the mid-2000s and its current level marks the lowest reading since 1997. Among age groups, the 65 years and older cohort has been the only age group to experience some stability in the reported homeownership rate throughout the housing market’s downturn. With an 8.7 percentage point decline (down to 61.4 percent), the homeownership rate within the 35-44 age group has fallen the most among any cohort. The other cohorts have also experienced appreciable declines in homeownership, with drops of 6.8 and 6.1 percentage points for the under 35 and 45 to 54, respectively. The 55 to 64 cohort has registered a smaller rate of decline compared to the other age groups (-4.6 percent), but its homeownership rate also slid to its lowest point on record during the first quarter of 2012.

Although younger households are likely not doubling up with roommates, moving back in with their parents and/or re-entering school to the same extent as they were at the peak of the recession, the slump in homeownership rates among these cohorts will likely continue over the near term. Any recovery in housing demand among this age group will be blunted by the fact that the wide majority will opt for rental units. Since the 45-54 and 55-64 age groups account for nearly half of all owner-occupied households combined, shifts in homeownership among these cohorts will have the largest effects on homeownership rates, and other aspects of the housing market, going forward. As the labor market continues to make progress over the next several quarters and households in the 45-54 and 55-64 age groups see their own economic situations improve, they will likely begin to re-constitute themselves and the majority of these formed households are expected to be homebuyers.

The quarterly census report also examines trends in the vacant housing stock. As of the first quarter of 2012, the rental vacancy rate dropped to 8.8. This marks the lowest reading for this measure in nearly a decade. This result appears to match up with other results that show rising absorption rates for apartment properties even as the supply of new multifamily units continues to climb. The homeowner vacancy rate declined for the fifth consecutive quarter, contracting to 2.2%, which was also its lowest level observed since mid-2006.


Homeownership Rates Across All Metro Areas

March 12, 2012

For timely information on homeownership rates, the standard reference is the Census Bureau’s Housing Vacancy Survey (HVS), which releases information for the U.S. on a quarterly basis.  On an annual basis, the HVS also provides homeownership rates for the 75 largest metropolitan areas.  This information can be quite useful, but smaller areas may have particularly high homeownership rates or otherwise be of interest.

Also, the metropolitan areas in the HVS are entire Metropolitan Statistical Areas (MSAs), which can obscure important differences within some of the larger metros.  The New York-Northern New Jersey-Long Island MSA, for example, covers the five boroughs of New York City, all of Long Island, extends well into New Jersey, and even includes a county in Pennsylvania.  An area this large may easily have significant sub-areas with different homeownership rates.

For less timely data but more geographic detail, the standard source is the Census Bureau’s American Community Survey (ACS).  In a recent study, NAHB used the latest (2010) ACS data to calculate homeownership rates for all MSAs in the country, breaking the eleven largest their component divisions (the government’s classification scheme often splits MSAs with a population of at least 2.5 million into “Metropolitan Divisions”).  The ten metros with the highest homeownership rates are shown below.  Palm Coast, Florida tops the list with a homeownership rate of 81.5%.

Most of the ten high-homeownership areas are relatively small in terms of population—eight have a population of under 100,000.  Most also have relatively moderate home prices— eight have a median home value of less than $175,000.  Nassau-Suffolk, New York stands out as an area that combines a relatively high rate of homeownership with a population of over 900,000 and a median home value of over $400,000.

Nassau-Suffolk is a Metropolitan Division within the larger The New York-Northern New Jersey-Long Island MSA.  An adjacent Division in the same MSA ( New York-White Plains-Wayne Division) has the lowest homeownership rate of any metro in the country—39.5%.

Homeownership is only one of many possible statistics that may be used to evaluate a local housing market.  The NAHB study also shows the number of owner-occupied housing units; home owner vacancy rate; share of single-family detached homes; value of homes owned; home owner incomes; growth in stock of single-family detached homes; and share of homes built recently for each of 384 metro areas, all available in a single spreadsheet.