In the latest sign of a changing housing market, homeownership rates are at a quarter-century low, while the rental-vacancy rate is close to the slimmest proportion in more than two decades, according to government data released Tuesday.
The seasonally adjusted homeownership rate, which shows the share of occupied homes in which an owner lives, fell to 63.8% in the first quarter — the lowest proportion since the end of 1989, the U.S. Census Bureau said.
Families with income both above and below the median have seen drops in homeownership rates over the past year.
Weak income growth and difficult-to-get mortgages are likely behind homeownership drops, experts say. Home prices that are running higher aren’t helping, either. Nor are the millions of properties that are underwater — these homes are worth less than owners owe for their mortgage — with borrowers struggling to make monthly payments,
However, long-term trends show that the drop in homeownership is actually pushing the U.S. back to “normal” levels, said Sam Khater, deputy chief economist at CoreLogic, an Irvine, Calif.–based analysis firm. The market may even see further drops, he added.
“In the mid-1990s pro-homeownership policies led to an expansion in mortgage credit and the homeownership rate peaked in 2004 at 69%,” Khater said. “Homeownership rates are back to roughly their long-term trend between the 1960s and 1990s.”
Meanwhile, the rental-vacancy rate ticked up to 7.1% in the first quarter, clinging close to 7% reached at the end of 2014, which was the slimmest share in 21 years. High demand has enabled landlords to crank up rents well past broader inflation growth.