Homeownership rate

The homeownership rate peaked in 2004 at 69.0%, as a booming housing construction industry and exceptionally low interest rates made houses more affordable than ever before. In addition, home prices were continually rising, making a home an attractive investment. Over the years following, however, the Federal Reserve raised interest rates to prevent runaway inflation. This effectively raised the price of homes and caused the homeownership rate to decline slightly in 2005 and 2006.

Homeownership dropped significantly between 2007 and 2009 as the subprime mortgage crisis decimated the housing sector and large-scale mortgage defaults set off a massive number of foreclosures. The subprime mortgage crisis lowered the homeownership rate directly and induced banks to restrict lending practices. In addition, housing prices collapsed, pushing many mortgages underwater, meaning the money owed for the house exceeds the market value of the house. Consequently, many of these homeowners simply abandoned their homes rather than continuing to pay.

The Federal Reserve cut interest rates, but homeownership still fell from the 2004 high of 69.0% to 65.5% in 2012. With a low volatility rate like homeownership, a drop over three percentage points represents a substantial drop. Homeownership further declined in 2013 and 2014, and was set to do well over 2016. The thought was that strong economic growth would continue driving up demand for housing and improved credit conditions would incentivize potential homeowners to take out loans. Instead, the homeownership rate fell to its lowest point in over 40 years. One explanation for this decline in the face of an improving housing market is that potential buyers were unable to keep up with the pace of house prices, distancing young buyers and pushing them further toward the rental market.

One factor that is expected to change this overall trend of decline is the fall in rental vacancy rates across the country. The overarching trend is clear. With rental vacancies falling and residential construction continuing to grow, the housing market is expected to tighten, which will bolster homeownership. As a result, the continued decrease that has occurred for nearly a decade is expected to slow moving forward. This shift began during the latter half of 2016, as homeownership began to increase after reaching a record low of 63.0% at the end of the second quarter in 2016. Since that low, the homeownership rate has inched upward. The shift has accelerated in 2018, as it has increased from 63.8% at the end of 2017 to 64.4% at the end of 2018.

Overall, the home ownership rate is expected to decrease 1.1 percentage points over the five years to 2025, reaching 65.5%. This decline includes a significant rise in 2020 amid the pandemic, when interest rates remained low, encouraging potential owners to buy. As the Federal Reserve has aggressively raised interest rates, starting in 2022, homeownership activity has decelerated in recent years. Greater financing costs, combined with surging inflation as well as recession concerns, have led to the home ownership rate expected to decline in 2024 and 2025.