Housing Vacancy Survey Report Q3 2018

Housing Vacancy Survey Report Q3 2018

By Rachel Drew

Introduction

In the third quarter of 2018, the U.S. homeownership rate ticked up to 64.4%, according to data from the Census Bureau’s Housing Vacancy Survey (HVS). The increase from the Q2 2018 rate extends the two-year run of rising homeownership rates, which bottomed out at 62.9% in Q2 2016. The share of households that rent, meanwhile, decreased to 35.6%

Though the data report only a 0.1% change in tenure rates from the previous quarter, there was an estimated net increase of 182,000 owners and net decrease of 68,000 renter households over the three-month period.

Changes in homeowner and rentership rates, however, are not distributed equally across all households. Indeed, the number and share of households that own and rent varies not just over time but also by age, race/ethnicity, and income. Breaking down housing tenure trends by these subsets not only highlights disparities in ownership rates across groups, but also reinforces the perennial need for affordable and accessible rental housing to shelter the nation’s over 43 million renter households.

The interactive graphics below provide a deeper dive on tenure trends over time by subgroups of U.S. households. Enterprise updates these charts each quarter as new information is released and discusses their implications for improving housing stability and affordability for all Americans.

National Tenure Trends

The Q3 homeownership rate, while up from the prior quarter, remains 5.0 percentage points below the series peak of 69.4% in 2004 at the height of the homeownership boom. The 6.5 percentage point swing in tenure rates that followed the peak represented the most dramatic loss of homeownership and increase in rentership rates experienced in the U.S. since 1890 (when data on tenure rates were first collected).

Though quarterly movements in tenure rates are generally small, each percentage point change in the homeownership or rentership rate equates to a shift in the tenure status of over one million households. How the housing market responds to these changes also impacts prices and vacancy rates in the existing stock, the amount of new housing constructed, and affordability pressures across the country.

Quarterly Tenure and Housing Cost Indices

The chart below shows changes in homeowner and rentership rates indexed relative to their 1980 levels, to better compare the magnitude of their movements over time. Due to lower shares of renter households, shifts in rentership rates appear as more dramatic than the same percentage-point changes in homeownership rates. It is also worth noting that the current share of households renting remains above the 38-year historical average.

Indexed data on real housing costs shows that both house prices and rents remain on their steady 7-year upward trend, despite the inflection in tenure rates that occurred over this period. These trends are elevating concerns about affordability in both rental and home buying markets, as inventories remain tight in many parts of the country.

Tenure Trends by Age

Tenure rates have long held a strong pattern by age, with each group increasing in homeownership and decreasing in rentership relative to younger households. Note that these groups are based on the ages of households at the time of observation, and does not follow generational cohorts as they mature. Thus, while current tenure rates of under-35-year-old householders reflect conditions among Millennials, the same data in the late 1990s and early 2000s represents trends among same-aged Gen-Xers.

Though all age groups experienced increasing homeownership rates and decreasing rentership rates during the housing boom, their tenure trends since 2004 have deviated somewhat. After the housing boom ended, all subsets of non-senior households saw dramatic shifts from owning towards renting, with the youngest group enduring the largest relative loss of homeownership. Households ages 35-64, meanwhile, increased their rentership the most of any age segment, relative to their low initial rentership rates. Senior citizens bucked this trend, however, holding their share of homeowning households steady through the downturn and declining only after 2012.

Since 2016, homeownership rates for households under age 55 have increased, despite rising housing costs and concerns about higher mortgage interest rates. The owning share of households ages 55-64, meanwhile, has been flat, and among seniors has continued to decline slightly, though the latter remains the only age group with a rentership rate below its 1994 level.

Tenure Trends by Race/Ethnicity

While persistent gaps in tenure rates by race and ethnicity remain in effect, the difference between White and Hispanic shares of households owning and renting has narrowed to its smallest level in the 25-year history of this data series, as the Hispanic homeownership rate increased by four percent (or a little less than two percentage points) after 2014. The homeowning share of Asian households has also grown, by an even greater six percent (2.9 percentage points) since 2016 alone.

Non-Hispanic Black households, meanwhile, have seen almost no change in their tenure rates since the end of the housing downturn, and their gap with non-Hispanic White households has widened to 31 percentage points, which is a record high for this data series. Their rentership rate also remains the highest of any racial/ethnic group, at 58.2%.

Tenure Trends by Income

Households with incomes above and below the national median have seen similar trends in their homeownership rates over time, experiencing nearly identical percent increases during the housing boom and decreases in the subsequent downturn in the housing market. The lower starting homeownership rate for below-median-income households, however, means their absolute change in homeownership – a 4.1 percentage-point increase 1994-2004, and a 3.6 percentage-point decrease 2004-2016 - was less than among higher-income households (+5.6pp and -6.1pp, respectively).

When expressed as share of households renting, however, the opposite is true, with the larger rate changes among higher-income households showing as more dramatic shifts of their smaller rentership rate relative to lower-income households. The share of above-median-income households renting is also remains higher now than it was in 1994, while a larger share of below-median-income households now owns their homes than did before the housing boom.

These data show that, even as the national homeownership rate continues to increase in the wake of the housing downturn, not all households are experiencing that growth equally. On one hand, low-income, Hispanic, and Asian households are seeing greater-than-average gains in their share of homeowners – and narrowing their gaps with high income and non-Hispanic White households. On the other, non-Hispanic Black and over 55-year-old households are not keeping pace with the national trend.

Disparities in tenure trends can exacerbate already stubborn inequities between subsets of households. Those that struggle to increase their homeownership rates will also see slower wealth accumulation overall, which inhibits economic mobility and opportunity. These trends are also an important reminder that, even as efforts to increase homeownership rates remain a mainstay of federal policy, preserving and expanding affordable rental housing options must also be a national priority.

 

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