More Americans became homeowners in the final three months of last year, fresh evidence that homeownership is rebounding after touching a post-crisis low.
The homeownership rate hit an all-time high of 69.1% in 2004 as the housing bubble inflated. In the aftermath of the crisis, it skidded lower and lower, finally bottoming out at 62.9% in 2016. In the fourth quarter of 2017, it jumped to 64.2%, the Census Bureau said Tuesday.
While not as volatile as some housing data, the homeownership rate has bounced around a bit. But Ralph McLaughlin, chief economist for Trulia, notes that the October-to-December period was the fourth quarter in a row in which the growth in the number of new owner households outpaced the number of new renter households.
In the fourth quarter, that discrepancy was striking. There were 1.52 million more owner households compared to a year earlier, and 76,000 fewer renter households.
The homeownership rate can be contentious. Many Americans believe government policies designed to boost it artificially helped cause the housing crisis that cratered the economy. Most housing watchers think there’s no “correct” level of homeownership, but that a natural equilibrium for that number probably lies somewhere between the 2004 high and the 2016 low.
But there are some clear-cut, non-controversial takeaways from the Census Bureau’s most recent report.
Homeownership among those under 35 jumped to 36% in the fourth quarter from 34.7% a year before. For those aged 35-44, the rate increased, though at a slightly slower rate — to 58.9% from 58.7%. Among those 45-54, it dipped to 69.5 from 69.8%.
“18-35-year-olds represent the largest potential group of homebuyers that aren’t yet homeowners (roughly the millennial demographic), and 35-44-year-olds (roughly Gen X) represent the demographic that was most impacted by the foreclosure crisis,” McLaughlin said. “Increases in homeownership amongst these two cohorts are a sign that the scars of the Great Recession are finally starting to heal.”
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It’s worth noting that analysts’ interest in millennials and first-time homebuyers has shifted dramatically over the course of the past few years. As the recovery trudged forward, and first-timers continued to make up a much smaller share of buyers than in the past, many analysts worried that early momentum in the market would wane without fresh demand.
But that dynamic soon shifted. Demand has been surging. What’s needed now is fresh supply.
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The supply-demand imbalance is skewing prices higher and making the market far more competitive. Inventory of homes for purchase fell to the lowest since the National Association of Realtors started keeping track in 1999 in December, the group said earlier this month.
Some housing analysts think the tax cuts passed late last year may dampen demand for ownership, and that reduced demand may even be a good thing.