The nation’s homeownership rate fell in the third quarter compared to the year before, but economists say the housing market’s recovery remains on track, albeit at a slower pace.
At 65.3 percent, the homeownership rate compared with 65.5 percent during 2012’s third quarter, the Census Bureau reported Tuesday. The only time a lower third-quarter rate was recorded was in 1995, when it was 65 percent. During the first two quarters of this year, the rate held fast at 65 percent.
“I’m not very concerned,” said Gene Amromin, a senior economist at the Federal Reserve Bank of Chicago. “We have been historically obsessed with homeownership rates. There’s no relationship between homeownership rates and good and bad things.”
In fact, the percentage of people who owned homes peaked at 69.2 during 2004’s second quarter, and was artificially inflated as a result of the easy lending policies that helped form the housing bubble.
Now, in addition to tighter credit, demographic trends are helping keep a lid on homeownership and household formation. A recent report by Pew Research Center, using Census data, found that last year, 36 percent of adults between 18 and 31 years old were living with their parents, the highest share in at least 40 years. In 2012, 63 percent of that age group had jobs, compared with 70 percent five years earlier.
“The share of millennials with jobs hasn’t improved over the past year,” said Jed Kolko, chief economist at real estate website Trulia. “Young people had a rough recession, and are still having a slow recovery. Affordability is worsening, both for rentals and buying.”
Foreclosure activity, while on the decline, also continues to weigh on homeownership.
The Census Bureau also reported that 8.3 percent of rental units and 1.9 percent of homeowner housing was vacant during the third quarter. The median asking rent for rental units was $736 during the quarter, a number that has continued to trend upward. The median asking price of vacant homes nationally for sale was $140,600.
Last month, home affordability was at its lowest level in five years as a result of both rising home prices and mortgage interest rates, according to the National Association of Realtors.
A lack of desirable homes available for sale led to multiple-offer scenarios and bidding wars, pushing up home prices. But economists agree the gains are unsustainable, given the much smaller increase in household income.
Home prices rose 12.8 percent nationally in August compared to the year before, according to the S&P/Case-Shiller home price index, released last week. On Tuesday, housing analytics firm CoreLogic said September home prices rose 12 percent nationally compared to the same month last year.
“They are appreciating at an unsustainable rate, but that’s partly because the market declined so much,” said Sam Khater, deputy chief economist at CoreLogic. “We fully expect home prices to decelerate and decelerate quite a bit heading into 2014, to decelerate to 4 (percent) to 5 percent.”