The U.S. home ownership rate fell to the lowest level in 15 years in the first quarter as borrowers lost homes to foreclosure and tight inventory kept buyers off the market.
The rate dropped to 65.4 percent from 66 percent in the fourth quarter and fell a full percentage point from a year earlier, the Census Bureau said in a report today. That is the lowest level since the first quarter of 1997, and down from a record 69.2 percent in June 2004.
Mounting foreclosures are displacing borrowers, while a lack of inventory has kept home sales from accelerating amid record affordability, the National Association of Realtors reported April 19. The home ownership rate probably will settle around 64 percent, where it stood from about 1965 to the mid-1980s, because credit conditions are similar to that era, said Patrick Newport, U.S. economist with IHS Global Insight.
"They may go up and down a bit, but generally they're heading down," he said in a telephone interview today.
Falling home ownership has fueled demand for rentals. The U.S. apartment vacancy rate fell to 4.9 percent in the first quarter, an 11-year low, according to New York-based Reis Inc.
The ownership rate may decline further and home repossessions may increase this year as lenders step up foreclosures after a $25 billion agreement by the nation's largest loan servicers in February to settle allegations of improper practices. Foreclosure filings fell to the lowest since 2007 in the first quarter as banks slowed actions before the settlement, according to RealtyTrac Inc.
The homeownership rate may fall below 64 percent by the end of 2015 and stay there for years, Scott Simon, the mortgage bond head of Pacific Investment Management Co. in Newport Beach, California, said in an e-mail today.
"It will be lower by 2017," he said. "It will be lower in 2020."
About 6 million homeowners will lose their property in the next five years because of inability to pay, creating 4 million new rental households, Simon said in an April 24 interview on Bloomberg Television.
The home ownership rate rose to a record in 2004 when President George W. Bush, running for re-election, called for expanding home-loan availability to create an "ownership society."