For the first time in 13 years, the U.S. homeownership rate ticked up, and millennials are behind the long-awaited boost. The U.S. Census Bureau reported Tuesday that the rate increased to 64.2 percent in the fourth quarter of 2017, up from 63.7 percent a year prior.
The lion's share of the boost came from younger Americans. The homeownership rate among households headed by someone under the age of 35 increased to 36 percent in the fourth quarter, up from 34.7 percent a year prior. It was the largest increase of any age group during that period. Millennials—projected to be the largest homebuying generation since the baby boomers—are entering the housing market after years on the sidelines and saddled with low wages, tight credit, and high student debt. The Census Bureau reported yesterday that the country added about 1.5 million new households over the past year and that renter households fell by 76,000—the second consecutive quarter of such declines.
The Wall Street Journal called the increase a “crucial turning point” and credited the federal government for loosening policies formed in the wake of the housing crash. The homeownership rate peaked at more than 69 percent in the mid-2000s, boosted by easy credit widely available during that time. But the housing crisis left many of those mortgages in default, ultimately costing banks billions in bad mortgages. That prompted banks to tighten credit and down payment requirements that made it more difficult for young people with thin credit histories and large student debt burdens to get a mortgage. By the second quarter of 2016, the homeownership rate had sunk to a
50-year low of 62.9 percent.
While the homeownership rate still remains below its long-term average of 65 percent, housing economists overall are upbeat. However, economists do caution that inventory shortages and rising home prices may jeopardize larger jumps in the homeownership rate.
Source: “Millennials Propel Homeownership Rate to First Increase Since 2004,” The Wall Street Journal (Jan. 30, 2018) [Log-in required.]
