The homeownership rate dropped to 66.4 percent in the first quarter, the lowest level since 1998, according to a report by the Census Bureau out Wednesday. It fell from 66.5 percent in the fourth quarter of 2010 and has fallen every quarter since mid-2009.
“It provides yet more evidence that Americans are now less able and less willing to buy a home,” said Paul Dales, economist with Capital Economics. “The housing crash has more than reversed the increase seen during the boom.”
Homeownership reached its peak of 69.2 percent in the last quarter of 2004. After an explosion of toxic mortgages in 2003 and 2004 lax lending requirements were blamed. There was also the assumption that home prices would continue to increase, said Anika Khan, economist with Wells Fargo. “It will probably continue to trend down as home ownership is looked at with a little more scrutiny due to the environment of foreclosures and declining prices,” Khan said.
The homeownership rate varied throughout the U.S. with the Midwest seeing the highest level, 70.4 percent, and the West with the lowest level of 60.9 percent, the Census Bureau said.
Walter Molony, spokesperson for the National Association of Realtors said the rate never should have reached the unsustainably high level of 2004. “We had an artificial inflation to the homeownership rate as a result of the toxic loans that induced people into the market that should have stayed in the rental side,” he said. “It’s a hangover effect right now.”
Molony believes the homeownership rate will continue to hover at its current rate, which is the long-term average in the modern housing era, he said.
The home-vacancy rate—a measure of the number of properties empty or for sale--dropped to 2.6 percent, nearly the same rate in the first quarter of 2010, the Census Bureau said. The rate is based on 74.5 million residences where nearly 2 million vacant properties were for sale, the Census Bureau said.
As homeownership continues to trend downward, recent polls have suggested Americans still believe owning a home is a good investment. A recent study by the Pew Research Center shows that 81 percent of Americans believe “buying a home is the best long-term investment a person can make.”
“Even if they value living in a house we are seeing many are choosing to rent,” Khan said. “They have seen consistent prices declines which makes it [a home] a volatile investment.”
On Tuesday, the Standard & Poor's/Case-Shiller 20-city index showed home prices declined in 19 metro areas from January to February and at least 10 major markets are at their lowest point since the housing bubble burst.
“Some people have been seriously scarred and never want to be burdened with home ownership again after what they’ve been through. You’re going to see many more people in the future be renters rather than home owners,” personal finance expert Suze Orman recently told The Fiscal Times. The financial guru urges Americans to rent.
Some 10.1 million renters—more than one in four—now spend over half their incomes on housing. Low-income renters are particularly likely to be severely cost-burdened because of the shortage of affordable housing across the country, the report found.
Home Vacancies Fall in First Quarter as Foreclosures Stall (Bloomberg)
Apartments the Prize for Pritzker Realty (Wall Street Journal)
Home Rentership Society (CNBC)