Homeownership The Real Story Behind The Headlines

Dated: 08/06/2015

Views: 288

by the kcm crew 7/29/15


The big housing news this week is that the homeownership rate has dropped to 63.4% which represents the lowest rate in 48 years. That news definitely is making headlines. Yet, to fully understand what this means we have to look at the story that created these headlines.

There is no doubt the homeownership rate has declined since the housing crisis. Here is a graph showing the homeownership rate over the last twenty years. It skyrocketed during the housing boom and has steadily fallen since the bust:

HomeownershipRates | Keeping Current Matters

The story behind the headline…

The dramatic fall in the rate over the past year must be looked at very closely. The rate is determined by the “number of households” who rent versus those who own. Let’s assume you have nine friends that live on their own (thus forming a household); six of them own and three of them rent. That would mean that 66.6% (6 out of 9) of your friends that live on their own are homeowners.

Now, let’s assume you have another friend who has been living with his parents. He would not be considered a separate household because he lives within his parents’ household. Once that friend moves out of his parents’ home and gets a place of his own, he will become part of the household count. Let’s assume, since he is just starting out, that he moves into a rental.

When he does, you now have ten friends that live on their own. If six still own their home and four of your friends now rent, the homeownership rate of your friends drops to 60% (6 out of 10). The number who own didn’t decrease; but the percentage decreased.

With the economy improving and job numbers looking better, more and more young adults are beginning to move out and get a place of their own. However, most will start in a rental situation thus driving the “percentage” of homeownership down. Auction.comexplained the most recent drop in homeownership rate this way:

“This occurred as household formations popped, implying millennials are riding an improved labor market out of mom and dad’s house. Roughly a third of millennials live at home according to Census data, an elevated figure. Continued gains in the labor market will coax increased numbers out into their own places, a majority of which will be apartments, as this age cohort lacks the financial wherewithal to buy.”

What does this mean to the future of homeownership?

The great news is that study after study has shown that Millennials aspire to homeownership as they still see it as a major part of the American Dream. As they get more comfortable with their financial situation, many of the Millennials who finally made it out of their parents’ homes this year will become homeowners over the next several years. An increase in homeownership rates will follow.

Blog author image

Jason DePaz

Jason has been a real estate broker since 2005 and has continued to sharpen his skills to become one of the most outstanding agents in Portland. Working with Jason you will find that he is an excelle....

Want to Advertise on this Site?

Latest Blog Posts

Portland Active Foreclosures For Sale

Looking for the latest bankowned properties in Portland Oregon?  Click the picture for access to the list.;

Read More

What Are The Top Home Selling Tips

Selling a home for top dollar takes some work but is worth the extra effort.  If you think posting a sign and advertising it on the internet will get it done, you are incorrect.  Top

Read More

What Is Your Home Worth In Portland Oregon

Curious of what your home is currently worth?  I'll create a detailed report for you free and drop off a hard copy to your home.  Click on the link below, enter your info and receive your

Read More

Great Investment 1500000 1816ft2 Close In SE Portland Pocket Community Of Brand New Homes For Sale

$1500000 / 1816ft2 - Close in SE Portland pocket community of brand new homes for sale. The... 10 Bed )

Read More