Mirroring the UK, Canada, Australia and New Zealand experiences, U.S. home ownership dropped to a 35-year low in the second quarter of 2015 as more Americans opted for renting.
According to the US Commerce Department’s seasonally adjusted figures, the home ownership rate fell to 63.5 percent (EU figures show UK, back in 2005, at 70 percent, now down to 64.6 per cent and falling). This is the lowest US figure for the seasonally adjusted series which started in 1980, and the unadjusted series goes back to 1965.
The drop in US home ownership, as elsewhere, underscores the damage inflicted on housing by the recession and the economy’s subsequent slow recovery from the downturn.
Andres Carbacho-Burgos, a senior economist at Moody’s Analytics in West Chester, Pennsylvania told The Reuters News Agency:
“The trend is not going to continue. We think that the homeownership rate is close to bottoming out, but we don’t expect it to start rising substantially before 2017. The homeownership rate peaked at 69.4 percent in 2004. It was at 63.8 percent in the first quarter.”
The US unemployment rate is at seven-year low of 5.3 percent (the jobless rate in the UK remained unchanged at 5.5 percent in the three months to April 2015), close to the 5.0 percent to 5.2 percent range that most Federal Reserve officials consider consistent with full employment.
As in the UK, a tightening jobs market is starting to put upward pressure on wages, which economists say will eventually lift the median income and pull more first-time buyers into the housing market.
While the firming jobs market has boosted household formation that has largely benefited the rental market in the short term.
The US residential rental vacancy rate fell to 6.8 percent in the second quarter, the lowest level since 1985, from 7.1 percent in the first quarter. The median asking rent across the US increased to $803 in the second quarter from $766 at the start of the year.
Economists say sky-rocketing rents, experienced across all the countries mentioned above, will eventually drive people towards buying, and could put upward pressure on inflation later this year, hence the threats of interest rate rises across the piece as well.
Ed Stansfield, chief property economist at Capital Economics in London told The Reuters News Agency:
“Our forecasts that [US] rents will grow at an annual rate of 5 percent both this year and next would represent the fastest rate of rental growth since the 1980s,” In the second quarter, homeownership increased among Americans aged 35 years and younger, but declined for every other age grouping.
“As the millennials age, it’s expected they will start buying more homes and hopefully this is a sign that this trend is beginning,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.”
It’s interesting to note how the Anglo Saxon economies across the world mirror each other in terms of economic growth, unemployment rates, house prices, home ownership and renting trends, and how much this experience contrasts significantly from the European and Asian economies.
US Renting booms as homeownership hits 35 year low – http://t.co/p3zaZFWUvc
— LandlordZONE® U.S. (@LandlordZONEUS) August 4, 2015