The homeownership rate declined slightly during the first quarter of 2013, falling to a seasonally adjusted reading of 65.2%. This marks the lowest reading since the end of 1995 and a 4.2 percentage point drop versus the peak observed in mid-2004. While the homeownership rate is somewhat lower than its 20-year historical average, the rate has not fallen as low as some analysts anticipated, due in part to a sluggish pace of new household formations. In other words, though the numerator (owner-occupied households) has fallen, still-slow growth in the denominator (total occupied households) has kept the homeownership rate from falling lower.
Across age groups, homeownership rates either remained flat or declined versus the first quarter of 2012. The largest percentage point decline in the homeownership rate occurred within the group of households headed by someone aged between 35 and 44 years (1.3 percentage points), followed by a 0.8 percentage point decline within the 55-64 householder cohort. Each of the householder cohorts have registered declines in the homeownership rate since peaking around the mid-2000s, but the relative degree of contraction across cohorts has been evident.
Householders aged between 35 and 44 years have experienced the largest decline in homeownership rates, falling ten percentage points in the past eight years and reaching an all-time recorded low of 60.1% during the first quarter of 2013. By contrast, the homeownership rate for households headed by someone 65 years or older is currently 1.4 percentage points below its peak and has remained above 80% in all but two quarters since the second half of 2007.
The continuing slide in homeownership rates among the 35 to 44 and under 35 householder age groups are a concern for longer-term housing demand going forward, fluctuations within the 45-54 and 55-64 cohorts will affect the outlook with greater immediacy. Combined, these cohorts are the largest groups of homeowners and represent a primary source of “move-up” demand, whereby current owners trade their existing homes for newer and/or larger living spaces. The rate at which householders in these age groups become homeowners (again, in most cases) will be an important part of the housing market’s overall recovery.
The Census Bureau’s quarterly survey also provides estimates of vacancy rates among the stock of owner and rental housing. The rental vacancy rate continued its downward trend during the first quarter of 2013, declining 20 basis points from a year ago to 8.6%. In addition, on a 4-quarter moving average basis, the rental vacancy rate dropped to its lowest reading since the end of 2001. The homeowner vacancy rate dipped 10 basis points compared to the first quarter of 2012 and has held steady at a 4-quarter moving average of 2% in each of the last two quarters. In addition, the homeowner vacancy rate has trended significantly lower since the toughest days of the housing market downturn and remains in range of levels occurring prior to the boom and bust period.