According to the latest Housing Vacancies and Homeownership release from the U.S. Census Bureau, the homeownership rate decreased slightly to 64.1% in the second quarter of 2019. This is down 0.2 percentage points from the second quarter of 2018. While the number of new owner households continues to show solid growth, the homeownership rate during this time remained flat due to a considerable increase in new renter households. In addition, this is the first quarter where the number of new renters were larger than the number of new owners since the fourth quarter of 2016.
Despite the flat ownership rate, the second quarter of 2019 experienced just over half a million new owner households. While considerable, this marks an end to a six-quarter streak where owner-occupied households grew by more than a million. At the same time, the number of new renter households also increased by nearly half a million. This could indicate the start of another upward trend in renting, as this is the second consecutive quarter with increasing renter households and the first with more new renters than owners since the end of 2016. Though the ownership rate was flat, total household growth remains strong, topping 1% for seven consecutive quarters. This continues the most significant streak of household growth in more than 12 years.
Supplementing the Census release with CoreLogic mortgage application data, we find that home purchase activity is picking up among young homebuyers aged 18 – 44. Three cities in particular have shown significant increases in mortgage applications among this age group: Providence, Rhode Island (+23.5 pts.), New Orleans (+17.4 pts.) and Dayton, Ohio (+16.6 pts.). Conversely, shares among these young buyers are decreasing in Tulsa, Oklahoma (-12.9 pts), Oklahoma City (-11.6 pts.) and El Paso, Texas (-11.6 pts).
It’s equally important to examine household growth dynamics and the homeownership rate. Dynamics has looked solid for the past three years. Although growth in the homeownership rate has flattened, it’s for a good reason: new renter households in the market have grown at nearly the same rate as new owner households. Positive household formation of owners and renters is a benefit to both the resale and investment sides of the U.S. housing market and should continue to support solid demand for housing into the foreseeable future.
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