February 5, 2020

More Signs of Uneven Homeownership Gains in Fourth Quarter

homeowenrship
  • The national homeownership rate rose for the second straight quarter to 64.8 percent 
  • Annual data show largest rentership declines among Hispanic and low-income households
  • Younger households have largest long-term gains in homeownership but face headwinds

The latest update to Enterprise’s quarterly Housing Tenure Trends report shows another small increase in the national homeownership rate at the end of last year, to 64.8 percent on a seasonally adjusted basis. Though not statistically significant, this 0.1 percentage-point change extends gains observed in Q3 and continues the bounce back in the share of homeowning households since the end of the 12-year downturn in homeownership rates in 2016. The share of households renting, meanwhile, declined slightly to 35.2 percent in the fourth quarter.

These national level trends in housing tenure – i.e.  whether households own or rent their homes – offer one perspective on the state of the U.S. housing market. Yet, while broad increases in homeownership are generally seen as a positive indicator for housing markets and the economy, not all subsets of households by age, race, and income benefit equally from such gains. 

The Housing Tenure Report dives deeper into the tenure data among these groups to uncover differences in their owning and renting patterns, which have important implications not just for housing markets, but also for addressing inequalities in wealth and access to opportunity.

Data for the report are based on the U.S. Census Bureau’s quarterly Housing Vacancy Survey (HVS). 

Quarterly and Annual Homeownership Rates Rise Slightly

The uptick in homeownership rates last quarter ended 2019 on an optimistic note. The continued rise in this rate since 2016 reflects the net addition of 6.2 million homeowning households over the last three years. The simultaneous decline in the national rentership rate, meanwhile may bring some relief to renters competing for a dwindling supply of available and affordable rental units.

Indeed, an index of the costs of rented housing last quarter showed its first decline in over two years and its largest drop since 2012, as non-housing inflation exceeded the nominal growth in median rents. Homebuying costs, meanwhile, continued to rise dramatically through Q3 (Q4 data is not yet available) and close in on record highs reported during the homeownership boom of the mid-2000s.

Tenure Patterns Converge by Income but Diverge by Race/Ethnicity

While national data on owning and renting may suggest broad trends in tenure patterns, they can mask very different trajectories among subsets of all U.S. households. For example, when segmented by income, households with earnings below the median for all families (around $59,000) have seen a larger increase in homeownership over the last few years than those with higher incomes. The gap between these two groups is now smaller than at any time in last 25 years, though higher-income households still rent at less than half the rate of those with lower-incomes. 

It is worth noting that some of this pattern may be due to shifts in the income status of households rather than in the buying and renting behavior within income groups. For instance, retiring homeowner Baby Boomers may be falling into the lower-income category, which could increase their ownership rates without any additional home purchases among this group.

Tenure trends also vary by race and ethnicity, with Hispanic and non-Hispanic White householders increasing their shares of homeowners in 2019, while non-Hispanic Black households saw no change and Asian and other race households added to their rentership rate. Despite this, since 2016 the homeownership rate among Asians/other races rose more than for any other racial/ethnic subgroup, up 2.4 percentage points to 55.2 percent. Hispanic homeownership was also up significantly over this period, though a majority (52.5 percent) of these households still rent their homes.

As mentioned before in this report, diverging tenure trends between Non-Hispanic Black and White households has important implications for the racial wealth gap. If growth in the share of Black homeowners continues to lag that of other subsets, their capacity for asset-building will remain limited. At the same time, a majority of Black and Latinx households still rent, which will keep demand for suitable rental housing options high, especially in cities with large shares of residents of color.

A Closer Look at Tenure Rates of Young Adults 

For this quarterly tenure trends report, we take a deeper dive into the recent trajectory of householders under age 35, which includes the bulk of the Millennial generation. These households had the largest growth of any age group in their homeownership rate, both in 2019 and since national tenure rates changed course in 2016. While nearly two-thirds of this subset still rent, the bump in the share of Millennials now owning homes is welcome news to the housing and mortgage industry.

Whether this trend continues, however, remains to be seen. Young households remain more likely than older ones to be burdened with educational debt and reliant on their families for financial support. The higher share of people of color among Millennials also means those that have not yet bought are less likely to have parents that own homes and are able to contribute to their children’s home purchases.  

This group of renters also struggles to afford their current housing expenses, with 47 percent spending more than 30 percent of their income on rent. Note also that these tenure rates only capture young adults who head their own household, and do not include the more than one-third of adults under 35 who live with their parents

Subscribe to our daily Today In Housing newsletter and visit the Enterprise Blog for more analyses of tenure and demographic trends and their implications for affordable housing and access to opportunity.

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