The Census Bureau’s announcement Tuesday that the national homeownership rate ticked up slightly in the third quarter of this year has some analysts wondering if this is a turning point for homeownership and others labeling slow household formation as a persistent hindrance to a full housing market recovery.
“Today’s data could be interpreted as an early sign that mortgage buyers are finally beginning to make more of a contribution to the housing recovery and the eight-and-a-half year decline in homeownership rates may finally be coming to an end,” Capital Economics said in a statement released Tuesday.
On the other hand, Trulia chief economist Jed Kolko said in response to the Census data, “Household formation was alarmingly slow and vacancies remain stubbornly high.”
The national homeownership rate stands at 65.3 percent as of the end of the third quarter, up 0.3 percentage points from the previous quarter, but down 0.2 percentage points from last year, according to the Census Bureau.
The homeownership rate is highest in the Midwest, where the third-quarter rate is 69.6 percent, and lowest in the West where it is 59.5 percent. The Northeast and South stand between with homeownership rates of 63.6 percent and 66.9 percent, respectively, according to Census data.
All four regions demonstrated increases over the third quarter. However, a look at seasonally-adjusted data reveals a stagnant homeownership rate of 65.1 percent nationally in the third quarter, unchanged from the
second quarter and down 0.1 percentage point from the first quarter of the year.
Household formation year-to-date in the third quarter was 380,000, still well below historical norms of 1.1 million.
“What’s behind sluggish household formation?” Kolko asked, and then responded, “The share of millennials living with their parents rose from 31.4 percent in 2012 Q3 to 31.6 percent in 2013 Q3, based on the raw Census data.”
Kolko went on to say, “Most worrying is that there’s been no increase over the past year in young adults moving out of their parents’ homes or getting jobs. The slow household formation number is one of the most alarming housing indicators to come out this year.”
Capital Economics also pointed out that the rise in homeownership in the third quarter was driven primarily by older buyers, while “ownership rates among under 35’s was more or less unchanged.”
Furthermore, the “recent drop in home sales and mortgage demand, as well as the fact that the rise was driven by older households, suggests that it is too soon to declare a turning point,” Capital Economics said.
The national vacancy rate in the third quarter was 8.3 percent for rental housing and 1.9 percent for homeowner housing, according to the Census Bureau.
The rental vacancy rate increased 0.1 percentage points over the quarter and decreased 0.3 percentage points over the year. Homeowner vacancies remained about the same both over the quarter and over the year, according to the Census Bureau.
“An unusually high share of vacant homes is being held off the market,” according to Trulia. About 53 percent of vacant homes are not listed for sale, “the highest share since before the bubble,” Trulia said.
Looking ahead, Capital Economics said the recent slowdown in housing market activity might suggest another drop in homeownership to come, but “even if ownership rates do fall back next quarter, the scope for them to fall further seems increasingly limited.”