According to the latest U.S. Census Housing Vacancies and Homeownership data release, the homeownership rate grew to 64.8 percent in the fourth quarter of 2018. This is the eighth consecutive quarter of increasing year-over-year gains. Young households – 44 and under – have seen the largest increase with those under 35 years old and those 35 – 44 seeing the largest gains, increasing from 36 and 58.9 percent to 36.5 and 61.1 percent, respectively over the past year.
Why is the homeownership rate on the rise? From a technical standpoint, it’s because of strong owner-occupied household formation. The fourth quarter of 2018 was the fifth consecutive quarter that owner-occupied households grew by more than a million, at 1.7 million new owner households. At the same time, the number of new renter households either fell six out of the past seven quarters with a decrease of 167,000 households. This suggests that the increase in the homeownership rates is at least partly due to households making a switch from renting to owning. What’s more, total household growth has topped 1 percent for five straight quarters, which is positive news for the housing industry at large. This streak represents the longest and largest magnitude of household growth in more than 12 years.
While much of the recent growth in homeownership rates is due to young households buying homes, they aren’t doing so ubiquitously across the country. Using CoreLogic mortgage application data, we found millennials are buying homes at the highest rates in the more affordable Midwest, Mountain West and Northeast markets. Conversely, they are buying homes at the lowest rates in more expensive markets, like coastal California and Florida. For example, millennials make up the largest share of purchase mortgage applicants in Pittsburgh, Pennsylvania (57 percent), Provo, Utah (56 percent) and Rochester, New York (55 percent), but make up the lowest share of mortgage applicants in Sarasota, Florida (24 percent), Cape Coral, Florida (30 percent) and Ventura, California (32 percent).
More broadly, the homeownership data shows the U.S. housing market continues on a healthy path of recovery. This is for three reasons: first, the upward tick in homeownership has been stubbornly persistent, despite the existence of low housing affordability and inventory; next, household formation has seen the strongest streak in over a decade; and lastly, young households, which represent the largest pool of potential homebuyers in the United States, are starting to enter the homeownership game.
 In the event that the change for consecutive months is identical to the previous months by one decimal point, we expand the measure to multiple decimal points to break the tie.
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