Homeownership in the U.S.
The downward trajectory of homeownership can be observed in several of HUD’s 10 regions, though to different degrees.
In one of his first speeches after becoming Secretary of HUD, Julián Castro stressed the importance of homeownership in remarks given to the Bipartisan Policy Center’s 2014 Housing Summit, saying “when done responsibly, [homeownership] strengthens communities and boosts our economy. It helps families put down roots and secure their financial futures. In short, it’s a cornerstone of the American Dream.” This sentiment touches on why so many policymakers continue to stress homeownership as a way to build a healthy economy and society. However, in recent years the dream of homeownership has been out of reach for many American families.
In the fourth quarter of 2015 the national homeownership rate was 63.8 percent. Though this was up slightly from the previous quarter, when the homeownership rate was 63.7 percent, it was down from the fourth quarter of 2014 when the homeownership rate was 64.0 percent. This latest figure is down sharply from its peak when the national homeownership rate was 69.2 percent in the fourth quarter of 2004. The peak homeownership rate is somewhat skewed, however, as it was in the middle of the housing bubble. Nonetheless, aside from the first three quarters 2015 when the respective homeownership rates were 63.7, 63.4, and 63.7 percent, the homeownership rate has not been as low as the fourth quarter rate of 63.8 percent since 1994. Furthermore, the homeownership rate is currently below the average homeownership rate of 64.4 percent seen between 1965 and 1993.
The downward trajectory of homeownership can be observed in various regions and states across the country, though to different degrees. In the fourth quarter the Midwest Census Region, which historically has had the highest homeownership rate among the four Census Regions, had a homeownership rate of 68.1 percent, but this was down from its peak of 74.2 percent in the second quarter of 2004. Unsurprisingly, Michigan, a part of the Midwest Census Region and HUD Region 5, had one of the highest homeownership rates among the states in fourth quarter at 74.3 percent. But again, this too is down from a peak up 77.4 percent in 2006.
On the other end of the spectrum, New York State, part of the Northeast Census Region, had the lowest homeownership rate in the country in 2015, with a rate of 51.5 percent. This was down from a peak homeownership rate of 55.9 percent in 2007. Its HUD Region 2 counterpart, New Jersey, had a homeownership rate of 64.0 percent in 2015, down from a peak of 70.1 percent in 2005.
The differences from region to region and state to state show the various trends in homeownership across the country. But as the data from each region and state indicate, the prevalence of homeownership has fallen not only from the peaks during the housing bubble, but to levels not seen in twenty or more years.
The historically low homeownership rate can be attributed to a number of factors. Tight credit conditions, various debt burdens, demographic changes, stagnant wages, and changing consumer preferences have been connected to the historic fall in homeownership and rise in rental households. Many have even questioned whether the fall in homeownership is a negative development since the homeownership rate is not likely to return to the levels reached during the housing bubble. But researchers still expect the homeownership rate to eventually rise near its historical norm (since 1965) of 65 percent. As Secretary Castro has pointed out, homeownership is still an important goal for many households to secure a financial future.
However, this future of household financial security won’t occur unless consumers are able to purchase affordable homes. Some policymakers and commentators believe that households will soon start to realize this part of the American Dream, and that recent historically low homeownership rates are the bottom of the downward trend. Going forward many believe we should start seeing a pickup of home buying as the so-called millennial generation start forming families at higher rates and former homeowners who turned to renting look to buy homes once again. Whether this will occur remains to be seen. There are a number of supply and demand side hurdles that need to be cleared before homeownership picks up again.