US Homeownership Rate Drops To 15-Year Low
(Reuters) – The share of privately-owned U.S. homes fell to a 15-year low in the first quarter as falling house prices and stringent lending conditions push younger Americans, in particular, into renting.
The homeownership rate slipped to 65.4 percent, the lowest since the first quarter of 1997, the Commerce Department said on Monday, with the rate for Americans under the age of 35 dropping to an 18-year low.
“You are seeing the perfect storm of age, financing and the business cycle coming together to push down the homeownership rate,” said Steve Blitz, chief economist at ITG Investment Research in New York.
The homeownership rate, which was measured at 66.0 percent in the fourth quarter of 2011, peaked at 69.4 percent in 2004 at the height of a housing market boom fueled by cheap credit.
The collapse of the U.S. housing market bubble triggered the 2007-09 recession. With house values tanking, many – especially the younger generation – are rethinking the so-called American dream of owning a home.
House prices have dropped about 32 percent from their peak at the end of 2005, leaving millions of Americans with properties worth far less than their mortgages and forcing many others into renting.
In the first quarter, the median asking sales price for vacant homes on the market was $133,700, the lowest since the first quarter of 2005, the Commerce Department said. That compared with $133,800 in the fourth quarter.
The homeownership rate for those aged 35 and under fell to 36.8 percent in the first quarter, the lowest since 1994.
This group was seen as the hardest hit by the recession, driving many into their parents’ basements or to share lodging with friends and relatives.
Although young people are starting to find employment as the economy gradually improves, many either just do not have the savings to put down a deposit for a home or feel too insecure in their jobs to make such a financial commitment.
NO MONEY FOR DEPOSIT
“They are not financially able to purchase a home and many are just coming into their first job and just don’t have the savings and job security to be homeowners,” said Celia Chen, a senior director at Moody’s Analytics in West Chester, Pennsylvania.
Home buyers are required to put down as much as 20 percent of the asking price, a challenge given the 8.2 percent unemployment rate.
By contrast, the homeownership rate for people aged 65 and over was 80.9 percent in the first quarter, unchanged from the October-December period. Homeownership was lowest in the West, while higher rates were reported in the Midwest.