Homeownership Rate Continues to Improve
The rate of homeownership rate rose in the fourth quarter of 2017 to 64.2%, bringing more positive news to the home remodeling industry.
This is a gain of a half percentage point over 2016, when the Q4 rate stood at 63.7%, and reverses the declining trend in ownership that had been happening since 2004. More homeowners represent greater remodeling opportunity, either immediate or in the near future.
The trend was evident nationwide, with the four major regions all recording gains in homeownership. The West region, which historically has the lowest ownership rate in the U.S., saw the biggest gains, as its rate rose by one percentage point to 60%. Conversely, the Midwest region, reported just a 0.3% gain to 68.7%, although it is still the highest in the nation.
However, not all age groups posted an increase in homeownership in the fourth quarter. While people under 45 years of age increased their rate of ownership, there were declines among some of the older population groups. The largest gain was among the “under 35” age group – the bracket that includes Millennials – with a jump of 1.3% to 36%.
At the other end, we can see in the above chart that both the “45 to 54” and “65 and over” age groups lost a few homeowners. In each case, the homeownership rate fell by 0.3%.
The decline in the oldest group is not entirely a surprise. This is because baby-boomers have been entering this older group, and about a decade ago many were losing their homes through foreclosure in the housing crisis. Moreover, they’re at an age that it’s nearly impossible to regain homeownership – it may not make financial sense.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing-Home Sales. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $750,000 and higher. The data are released quarterly by the U.S. Department of Commerce and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers, for instance.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
