At 65.6%, two out of three Americans now own a home, as households headed by those under age 35 and blacks register the largest gains.
By Manuel Gutierrez, Consulting Economist to NKBA
Homeownership rates, which have been accelerating over the past year, reached 65.6% or two-thirds of Americans, in the first quarter of this year. The increase of the last five years is a partial reversal of its precipitous decline between 2005 and 2015 (Figure 1.)
As has been documented, the drop was largely caused by poor lending practices during much of the 1990s and early 2000s, which allowed those who didn’t have the capital qualifications to obtain mortgages. Those practices resulted in a climb in homeownership from 64% in the mid-1990s to a historical high of 69.2% by 2005.
Unlike that period, however, the current expansion of homeownership is on more solid footing. Mortgage lenders are demanding higher down-payments and have raised the minimum credit score required to qualify for a loan.
“Households headed by those under age 35 registered largest gains in Q1 home ownership.”
Although national rates rose by 0.3 point in the first quarter, gains in homeownership were not evident among all age groups. Households in the middle of the age range, between ages 45 and 64, actually saw their ownership rates fall.
The largest gains are among those in the youngest households, headed by persons under 35 years of age (Figure 2, left panel). Their homeownership rose by 0.8%, but they still have the lowest ownership rate of all households, which is understandable.
The other two age groups with increased homeownership are households in the 35-to- 44 and 65-plus age groups.
No quantitative evidence is available to explain why the middle-aged groups bucked the trend and experienced declines.
Unlike ownership by age, all racial/ethnic groups gained. The right panel of Figure 2 shows that black households (along with “other ethnicities”) gained the most. Black ownership is up by 1.1 percentage point over the last year, even though they continue to post the lowest overall rates, with slightly under half, or 49.6% of black-headed households owning a home.
Households classified as either Asian or Hispanic had similar gains of 0.5 and 0.4 points, respectively. The homeownership of white-headed households remained virtually unchanged, up by 0.1 points, although they continue to have the highest rate overall, at 77.5%.
Geographically, not all regions enjoyed an improvement for the first quarter.
Figure 3 shows the regional trends over the last 60 years, going back to 1960. Broadly, they closely follow the national pattern, with a slow decline between 1980 and 1990, followed by a strong rebound in the next 15 years, preceding the collapse that began around 2005 — the start of the subprime crisis.
The Northeast is an exception to the pattern. Shown by the red line, it rose steadily from 1960 through 2005. Unlike the other three regions, its homeownership rate did not falter immediately after the 1980-1982 recession.
The West and the South, however, saw their ownership rates fall in the first quarter of this year. The West had the largest decline, 0.4 percentage points, to 59.7%, while the South dropped by 0.2 point, to 67.4%.
The other two regions, the Northeast and Midwest, saw their rates improve. The Midwest posted the biggest increase, up 1.1 points to 70.3% in homeownership. The Northeast, which, at 63.1%, has the second-lowest rate of all regions, gained 0.7 point for the period.
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