According to the Census Bureau’s Housing Vacancy Survey (HVS), the U.S. homeownership rate increased to 65.1% in the fourth quarter of 2019. This is 0.5 percentage points higher than the previous quarter reading of 64.8% and the highest the rate has been since the last quarter of 2013. Even so, the homeownership rate remains well below the 25-year average rate of 66.3% and the peak of 69.2% reached at the end of 2004. Decreasing mortgage interest rates have helped support the recent improvement in homeownership, along with housing affordability and sales of previously owned homes, which reached a two-year high at the end of 2019.
The HVS also provides a timely measure of household formations – a key driver of housing demand. The HVS count of total households increased to 124.0 million in the last quarter of 2019 from 122.5 million a year ago. The gains are largely attributable to strong owner household formation. Specifically, the number of homeowners increased by 1.3 million, while the number of renter households went up by 0.3 million in the fourth quarter. Indeed, the number of homeowner households has been climbing since the third quarter of 2015, while the number of renter households has been on a downward trend. This implies that the transition from renting to owning has been a powerful driver of the net increase in households.
The homeownership rates among all age groups, except for households ages 35-44, increased in the fourth quarter 2019. Households under 35, mostly first-time homebuyers, registered the largest gains, with the homeownership rate up 1.1 percentage points from a year ago. Households age 45-54 registered a 0.5 percentage point gain, followed by households age 65 and older (a 0.2 percentage point gain) and age 55-64 (a 0.1 percentage point increase). However, the homeownership rate for households age 35-44 dropped by 0.7 percentage points.
The nonseasonally adjusted homeowner and rental vacancy rates remained in record low territories in the fourth quarter, signaling a supply-constrained housing market. The homeowner vacancy rate remained constant at a low 1.4%, while the rental vacancy rate declined to 6.4%, from 6.8% in the third quarter.