Regardless of whether they rent or buy, folks will be paying more to do so, according to second quarter data released by the Census Bureau, which also shows the homeownership rate in the U.S. is at the lowest level in more than 50 years.
The percent of households that are owner-occupied, known as the homeownership rate, was 62.9 percent in the second quarter, the lowest since 1965. The rate is 0.5 percentage points lower than the second quarter of last year and 0.6 percentage points lower than the rate in the first quarter of 2016.
“Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market,” Doug Duncan, Fannie Mae’s chief economist, notes in an economic outlook note.
Less for More
A chart from the Census Bureau shows how rental asking prices have continued to rise through the last two recessions. Meanwhile, home sale asking prices, which have been rising this year, are recovering from the major drop during the last recession.
The median asking rent for vacant units was $847 in the second quarter, according to the Census Bureau. The median asking sales price for vacant sale units was $164,500.
Median asking rent for vacant “for rent” units shown with gray bars that indicate when the economy was officially in a recession. (Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey)
More Households Forming
But overall household formation has been relatively steady, thanks to renters who are going out on their own, the Wall Street Journal points out. Renter-occupied housing units surged by 967,000 in the second quarter to 43.9 million units from 42.9 million units in the second quarter of last year.
Meanwhile, owner-occupied units fell by 22,000 units to 74.4 million units in the second quarter compared to the same period last year.
Homeownership rates were highest for older households. Occupants aged 65 and older had a homeownership rate of 77.9 percent. The rate was lowest for those under 35 years at 34.1 percent.
Older Millennials Looking to Buy
Whatever is holding back renters from buying, whether it’s fewer starter homes or incomes, preferences may change in the future, leading these renters to become buyers.
Between 2010 and 2012, homeownership rate gains stabilized for young adults through their late twenties and early thirties, and between 2012 and 2014 homeownership rate gains were larger than the increments for previous generations passing through the same age range during the housing bust, according to Fannie Mae’s Economic and Strategic Research Group.
Find out more from Fannie Mae’s Home Story here
The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc
