During the fourth quarter of 2015, the US homeownership rate was 63.8%. According to the Census Bureau, the fourth quarter of 2015 is 0.1% higher than the second quarter but 0.2% lower than the fourth quarter of 2014.
Home Occupancy Rates
In the fourth quarter of 2015, about 87.2% of the total housing units were occupied while the rest 12.8% were vacant. Out of the 87.2% of occupied housing units, 55.7% housing units were occupied by the owner while the rest 31.5% of housing units were occupied by renters. Out of the total housing stock, 5.4% were vacant units that were held off market (Census, 2015).
So, coming down to regional measurements, the highest homeownership rates were in the Midwest with 68.1% and the lowest were in the West at 59% only. From a demographic perspective, people from the ages of 65 and above had the highest homeownership rate of 79.3% while the Millennials had the lowest homeownership rate of 34.7%.
From a per racial demographic perspective, non-Hispanic whites had the highest homeownership rate of 72.2% while African Americans has the lowest homeownership rate of only 41.9%. Hispanic homeowners, on the other hand, held a homeownership rate of 46.7%, which shows a huge gap between non-Hispanic homeowners and the other races (Census, 2015). Some of the above trends have been fairly constant and are quite reflective of historical rates. For instance, the older demographic has always had high ownership rates than the Millennials for the obvious reason that Millennials are still in the midst of building their careers and settling down, while the 65 and above have long paid off their mortgages.
Also, we already know that the 2008 crisis affected the African American community the most and they had the highest percentage in mortgage defaults, which is clearly represented in their low rates of homeownership. Experts from the commercial real estate industry believe the African American community has been hit the hardest because of their lack of awareness about homeownership, which we are frequently combating in the real estate world as well as here at The Power Is Now Inc.
Apart from the homeownership rates, the rental market also shows interesting rates in the fourth quarter. According to the Census Bureau, the national vacancy rates in the fourth quarter were 1.9% for homeowner housing and 7% for rental housing. The rental vacancy rates took a dip of 0.3% from the third quarter but did not change from the fourth quarter of 2014. The homeowner vacancy rate, on the other hand, had the same numbers from the third quarter as well as the fourth quarter of 2014.
Rising Homeownership Rate, Glimmer of Hope?
The hopes of economists have slightly augmented from the fact that homeownership rates from the fourth quarter have ticked up just a slimmer. With fingers crossed, we are hoping that it has hit the bottom and will now only rise up.
Not being adjusted seasonally, the homeownership rate rose from 63.7% to 63.8% from the third quarter. Despite the small increase, the commercial real estate market is hopeful. The second quarter of 2015 had showed us the biggest low of 63.4%, the lowest in the last 48 years. Every individual and organization that has been affected by the mortgage industry has their fingers crossed in hopes that this will be rock bottom and the only way to go from here is up (Census, 2015).
The 2008 crisis had almost 9 million homeowners in the US become homeless. Most of these people lost their homes to foreclosure, short sale or other distressed events. The small increase in homeownership rates is a sign that these people who were unfortunately affected by the 2008 crisis are now finally getting back on their feet and returning to the market.
Out of all the demographic trends within the real estate, there was a rather significant improvement in the homeownership rate among people from the ages of 35 to 44. The people from this demographic were the most affected and took the hardest hit during the foreclosure crisis. The fourth quarter brought a 1.2% increase from 58.1%. This group took the hardest hit because most were still on their way of becoming professionals in their industry, meaning they were mostly in managerial positions. These “middleman” positions were the first to go during the 2008 crisis as companies downsized, merged and acquired (Census, 2015)..
Many economists claim these quarterly estimates are not entirely reliable but the glimmer of hope has put a lot of us in a positive mood. This optimism born out of the rising homeownership rate, despite small, has been successfully seen for two successive quarters now.
In these desperate times, as optimistic as we would like to be, there are some reasons to not get too overboard. In the fourth quarter of 2014, the homeownership rate was still slightly down year-over-year from 64% and not seasonally adjusted. When the rate is seasonally adjusted we can see that it has modestly improved from the bottom when it increased from 63.5% in the second quarter to 63.7% in the fourth quarter (Census, 2015).
Dip In Renter Households
There has been a strong dip at the rate at which new renter households are being formed. There was a 300,000 increased in the number of renter households year-over-year in the fourth quarters, while in the third quarter that number was as high as 1.3 million (Census, 2015)..
In the recent quarters there had been an increase in the number of renters, which essentially stole away from the homeownership rates. The moderate increase in the homeownership could be well owed to the fact that renter household formation is slowing down. Homeownership is a matter that The Power Is Now and I take very seriously, as a home will be your greatest source of wealth, especially once you retire. Leaving a legacy is imperative as rent prices rise and homeownership plummets. Your power to take care of your family is now!
Eric Lawrence Frazier, MBA
President and CEO