November 2, 2017
The homeownership rate was 63.9% in Q3 2017, essentially unchanged from Q2 but up slightly from a year ago. While the year-over-year, 0.4-point increase in Q3 was smaller than that of Q2, it confirms the incipient trend of rising homeownership. The homeownership rate had dropped to 63.1% in Q2 2016, the lowest level since the U.S. Census Bureau began tracking this metric in the mid-1960s. The high was 69.4% in Q2 2004.
Gains in homeownership can be detrimental to the multifamily industry, but at this point there has been no falloff in apartment demand. The recent modest gain in the homeownership rate is not surprising, given that the market is rebounding from cyclical lows. A slow, steady increase in the homeownership rate will likely have limited impact on multifamily supply-and-demand dynamics. Household formation and the lengthy construction timeline of large multifamily construction projects should insulate the multifamily sector from these modest increases in homeownership. If the homeownership rate increases quickly, however, this will have a much greater negative impact on the multifamily market.
Homeownership for 35- to 44-Year-olds Rises Almost One Point
The year-over-year increase in homeownership was primarily driven by younger households, up by 0.9 points for 35- to 44-year-olds to 59.3% and 0.4 points for under-35-year-olds to 35.6%. There was no appreciable change in homeownership rates among the other age cohorts.
Households with Above-Average Income Gain Most in Homeownership
Q3 gains in homeownership were more prevalent among households with incomes above the U.S. median. Homeownership of these households rose to 78.4% from 77.8% year over year. For households with incomes less than the U.S. median, the year-over-year gain was more modest (49.5% from 49.2%).
Largest Increases in the West
Regionally, the West had the largest gain in homeownership, up by 0.7 percentage points year over year to 58.9%. The Midwest and the South both recorded 0.5-percentage-point gains. For the Midwest, the rate climbed to 69.1% year over year, while the South’s homeownership rate rose to 65.5%. Homeownership slipped 0.4 percentage points in the Northeast to 60.4%.
Los Angeles had the lowest homeownership level in Q3 (46.6%) among metros with at least 1 million population, followed closely by San Jose (49.9%), New York (50.3%) and Austin (51.9%). Las Vegas, San Diego and San Francisco also had rates under 56%. These are high-housing-cost metros or metros with high in-migration.
In terms of intra-urban patterns, homeownership climbed notably in the urban portion of metropolitan areas. The Q3 2017 rate was 49.5%, up 0.9 points from the prior year. Suburban homeownership was essentially unchanged at 70.7% year over year.