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Home Publications Blogs Beat the Press Homeownership Rate Plummets and NYT and Post Don't Notice

Homeownership Rate Plummets and NYT and Post Don't Notice

Tuesday, 01 May 2012 06:43

Every quarter the Census Bureau puts out data on vacancy rates and homeownership. For some reason, this release is almost always ignored.

This is unfortunate because it often contains very useful information on the housing market. One of the reasons that I could be so sure that we were seeing a bubble when house prices started diverging sharply from historic trends was that the vacancy rate was reaching record levels as early as 2002. As we learn in advanced economics, excess supply is supposed to lead to lower prices, not higher prices.

Anyhow, yesterday's release deserved special attention. It had both good news and bad news. The good news was that vacancy rates declined sharply from both the fourth quarter and the year ago levels. The rental vacancy rate fell by 0.9 percentage points from its year ago level, while the vacancy rate for ownership units fell by 0.4 percentage points. The levels are still much higher than normal, but this was by far the biggest quarterly drop since the recession.

The bad news was that the homeownership rate also plunged. It fell by 1.0 percentage point from its year ago level to 65.4 percent. This is 3.6 percentage points from its bubble peak and the lowest level since the first quarter of 1997. The homeownership rate for African Americans fell by 1.7 percentage points from its year ago level to 43.1 percent. That's the lowest level since the 4th quarter of 1995.

By age group, the homeownership rate for households headed by someone between ages 45-54 was down 1.8 percentage points from its year ago level to 71.3 percent. For the 35-44 age group it was down by 3.0 percentage points to 61.4 percent. This suggests that a unusually large number of near retirees will reach retirement without any equity in a home as an asset. Perhaps the younger group will be able to make up their loss, but the current economic picture does not make this look likely.

Anyhow, this release was big news that warranted some attention. The data are sometimes erratic, and these numbers may be partially reversed in next quarter's data, but the trends indicated in the release are a big deal.

Comments (12)Add Comment
For 45 -54
written by James, May 01, 2012 7:20
that still own homes, don't you think if they were heavily underwater, they would have done a strategic default?

Could the mere fact they are still in their home, they hae equity? Or you are assuming they don't?
WSJ now paper of record?
written by Robert Salzberg, May 01, 2012 7:40
WSJ published article yesterday:

Homeownership Rate Declines to 15-Year Low

Non homeowners have no equity
written by dean, May 01, 2012 7:52

many homeowners have little or no equity, but non-homeowners definitely have no equity. Homeownership is not everything, but unfortunately the vast majority of these people have little other savings.
written by PeakVT, May 01, 2012 10:35
The bad news was that the homeownership rate also plunged.

That's a little hard to say without knowing why ownership rates decreased. It could be the economy is keeping people from buying, or it could be there is a wave of short sales. We don't know at this point (though we can rule out some, such as a change in the MID).
The reason the HVS is ignored is it not accurate
written by Calculated Risk, May 01, 2012 11:28
Unfortunately it appears the HVS overstates the homeownership rate, and also the vacancy rate. The Census Bureau is researching the differences between the decennial Census, the ACS and the HVS, but most analysts have stopped using the HVS (except has an indication of trend).

Here is some recent research:

best wishes
written by James, May 01, 2012 11:32
Dean, thanks for responding.

The decline in ownership of course is affected by the economy esp. given that home affordability has been increasing compared to the past decade. 30-year mortgage at high 3 or low 4 but of course one needs to be able to service the mortgage. In Vegas, 10-yr old 2,000 SF condo is easily less than $200K.

We can assume the 54 year-old owner bought their house when they were in 30's, so that means they bought it in 1990's, so Dean is still thinking these folks have NO home equity left?

You have said house prices have reverted back to 2002 so one could have some equity if they bought theirs prior to that point?
Stategic Default?
written by keith johnson, May 01, 2012 12:53
As one of the 45-54 year olds who owns my own home, let me tell you the reason my wife and I didn't strategically default on our loan: we don't drop our commitments for "strategic" reasons, not if we can afford to make our payments. I expect a lot of people are like that.
The long term view....
written by AndrewDover, May 01, 2012 1:00

"Hough: Taking inflation into account, U.S. home prices are down to 1895 levels."

assumptions can be mistaken, so can perceptions
written by mel in oregon, May 01, 2012 1:17
many of the older (54+) also have traded up on their homes. so if they bought another home in 2006, they're probably underwater just as the younger buyer's are. in addition they are very likely to have been victimized in that their 401ks or pensions are gone. they may be supporting elderly parents as well as their adult children who have moved back home. they probably helped their children defray some college expenses. this scenario is realistic in that baby boomers have little to depend on except social security as a group. there are numerous websites to prove the validity of this claim. and of course low interest rates aren't moving people to buy, who cares how low the interest rate is if the home purchase value is 10% lower 2 years from now.
written by Jack, May 01, 2012 1:45
I take issue with your statement that the home ownership story has been ignored. There have been many stories written on this topic as well as the "rent vs. buy" corollary issue.
I agree that diminishing home equity levels is also an issue but it's not clear how low equity levels and lower ownership rates interact.
written by MacCruiskeen, May 01, 2012 5:43
So...when the ownership rate went up, this was bad, because it meant there was a bubble, and now that the rate has returned to pre-bubble levels (i.e., more like "normal") this is also bad? Did you expect that the bubble could collapse without this?
A lower home onwership rate not necessarily bad
written by Luke Lea, May 02, 2012 1:03

Isn't that one of the things that we have learned.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.