As the employment situation continues to improve, more buyers made their way into the housing market for the second quarter in a row.
The homeownership rate increased marginally over the last two quarters, but was fairly unchanged year-over-year, especially compared to the all-time high in 2004, the U.S. Census Bureau reported Thursday.
This has left many in the industry questioning if homeownership has bottomed out.
"Today's Census Homeownership and Vacancy Survey release also provides optimism that the homeownership rate may have hit bottom in 2015," said Ralph B. McLaughlin, Chief Economist at Trulia. "Many Gen Xers lost their homes during the recession, so this is a positive sign that we may be seeing boomerang buyers coming back into housing market. However, the increase was not statistically significant from a year ago."
According to the report, homeownership rate rose 0.1 percent to 63.8 percent in the fourth quarter of 2015, compared to 63.7 percent last quarter. Despite the rise however, the homeownership rate is 0.2 percent below the rate of 64.0 percent last year during the same period.
In addition, although the homeownership rate, while up from a 48-year low in the second quarter of 2015, is still below the peak of 69.2 percent in June 2004.
After suffering a major drop in November 2015, existing-home sales rose 14.7 percent to a seasonally adjusted annual rate of 5.46 million in December, up from 4.46 million in November. Year-over-year, existing-home sales are up 7.7 percent, and December's jump will mark the largest increase ever.
According to the National Association of Realtors (NAR), the first-time buyers share was at 32 percent in December, up from 30 percent in November and 29 percent a year ago. For the year, first-time buyers made up 30 percent of homebuyers, up 1 percentage point from 2014 and 2013.
"First-time buyers were for the most part held back once again in 2015 by rising rents and home prices, competition from vacation and investment buyers and supply shortages," said Lawrence Yun, NAR Chief Economist. "While these headwinds show little signs of abating, the cumulative effect of strong job growth in recent years and young renters' overwhelming interest to own a home should lead to a modest uptick in first-time buyer activity in 2016."
The Bureau found that homeownership was highest among those 65 years and older at 79.3 percent int he fourth quarter of 2015, down slightly 79.5 percent in the previous quarter. However, the only age group to increase their homeownership rate was the 35 to 44-year olds, from 58.8 percent in the fourth quarter of last year to 59.3 percent in the fourth quarter of 2015.
Capital Economics Property Economist Matthew Pointon added, "That gradual rise in the homeownership rate should continue over the next few years. On the demand side, there are large numbers of young adults who are currently living with their parents. And many of them would like to form their own household. The financial crisis locked them out of homeownership, as they lost their jobs and/or banks refused to provide them with a mortgage. But both factors are now steadily improving. Jobs are being created at a rapid pace, and we expect earnings growth will finally start to rise this year. As well as allowing more households to access homeownership, that will also cut down on mortgage delinquencies and keep more families in their homes."
The Bureau reported that the homeownership rates were highest in the Midwest at 68.1 percent in the fourth quarter, and lowest in the West at 59.0 percent. All regions, except the West experienced a year-over-year decline in homeownership.
Rental vacancy rates in the fourth quarter were 7.0 percent in the fourth quarter, unchanged from last year and down 0.3 percent from the previous quarter. The homeowner vacancy rate was 1.9 percent for the quarter, also unchanged from last year and last quarter.
"An improving labor market and easing credit conditions are finally leading to a gradual rise in the homeownership rate. But the rental vacancy rate has yet to rise, and that will put upwards pressure on rents over the coming months," Pointon stated.
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