The nation’s homeownership rate ticked up in the third quarter compared with the second quarter, suggesting that the three-year decline in home ownership may be starting to bottom out.
The rental vacancy rate also rose, a possible sign that rising rents could be reducing demand, according to a report released from the Census Bureau Wednesday.
The nation’s seasonally adjusted home-ownership rate stood at 66.1% in the third quarter, up slightly from 66% in the prior quarter but lower than 66.7% a year earlier. The rental vacancy rate was 9.8%, up from 9.2% in the second quarter and down from 10.3% a year earlier.
To be sure, industry watchers warn against reading too much into results from a single quarter. The increase in home ownership is small and the number could begin declining again in the chilly fourth quarter, when few Americans buy homes. And researchers at the New York Fed have pointed out that the millions of underwater borrowers mean that the “effective” rate of home ownership is much lower than the official statistic.
Paul Dales, a senior U.S. economist with Capital Economics, said he was initially surprised by the increases
Still, “I don’t think this alters the long term trends that have been going on,” he said. “The overall housing market will remain weak and the rental market will remain strong.”
During the housing boom, when easy credit made mortgages easy toobtain, Americans rushed to own homes, pushing the ownership rate near 70%. But the rate has fallen in recent years as owners began losing their homes to foreclosure or abandoning them. Last month, the Census reported that the rate of home ownership in the U.S. fell in the past decade by the largest amount since the Great Depression.
Meanwhile, millions of Americans have turned to the rental market at a time when little new product is being built, allowing landlords to raise rents. The national rate came in at $1,004 in the third quarter, up from $981 a year earlier, according to Reis Inc. While that’s benefiting owners of rental units, there are growing concerns that, given the weak economy, tenants won’t be able to afford continued increases. The Census’ increased vacancy rate also indicates that some tenants might be balking at asking rents.
When compared with the second quarter, the home-ownership rate increased slightly in the four U.S. regions: Northeast, Midwest, South and West. The Northeast’s climb to 63.7% made it the biggest gainer from the prior quarter, according to the Census report. The region’s rate slipped from a year earlier.
Minorities, who traditionally have the lowest home-ownership rate, owned more homes in the third quarter. The “black alone” category came in at 45.6%, up from the second-quarter’s 44.2%, while Hispanics climbed to 47.6%, from 46.6%. Both groups also saw gains from the year-earlier period.