Reversing a decade-long decline, homeownership rates, a key indicator of the nation’s economic health, have been rising modestly over the last year, according to the National Association of Home Builders.
Housing analysts attribute the increase to the decline of mortgage rates, which have fallen to 25-year lows, and to home prices, which are not rising as much as they did in the ’80s in most parts of the country.
They note, though, that homeownership rates, especially among people under 35, remain lower than in the early 1980s, evidence of unaffordable prices, stagnating wages, job insecurity and changing demographic trends.
The homeownership data track the percentage of housing units across the country whose occupants include the owner. Statistics are collected by the Census Bureau every 10 years and updated every three months through sample surveys of about 47,000 households nationally.
The bureau’s statistics are then bought by various organizations, including the National Association of Home Builders, which analyzes the data in semi-annual reports.
Gopal Ahluwalia, director of research for the National Association of Home Builders in Washington, said the recent trend upwards for homeownership was a sign that the economy remained weak but was improving.
“Economic growth is still at a sub-par level,” he said.
Though they are not as publicized as much as short-term data like housing starts and sales, homeownership rates, many housing analysts believe, are important measures of the nation’s overall economic health.
“If homeownership rates are declining it means we have a problem with affordability,” Ahluwalia said. “If the percentage of people who live in their own homes is on the rise that obviously means our standard of living is going up.”
As of June 30, the national homeownership rate was 64.4 percent, up from 63.9 percent a year earlier but down from 64.9 percent at the end of the second quarter in 1982 and 65.5 in the second quarter of 1980. There were 97.2 million households in the nation as of June 30th compared with 83.7 million at the end of 1982.
“If 1980 homeownership rates had maintained themselves, there would have been two million more homeowners by 1990,” said William C. Apgar, the executive director of the Joint Center of Housing Studies of Harvard University.
Homeownership rates are rising the least among younger adults, those under 35. For that group the rate was 37.8 percent as of June 30, up from 37.6 percent in 1992 but down from 41.2 percent in 1982.
Some housing analysts believe the rates depict a growing division in homeownership between young and old.
“The gap in homeownership rates between young and old has widened, and there is nothing to suggest that it is going to diminish,” said Peter A. Morrison, a demographer who has studied housing issues at the Rand Corp., a research institute in Santa Monica, Calif.
Regionally, the Northeast was the only section where the homeownership rate rose in the ’80s and early ’90s; it grew to 62.5 percent in 1992 from 61.1 in 1982, but was still lower than in the South and the Midwest.
Ahluwalia said the rate had increased in the Northeast because non-homeowners tend to be newcomers to an area and the Northeast has seen little inmigration in the last decade.
“The younger population, the ones most likely to be renters, are moving to other areas of the country, like the South and the West,” he said. “So those areas are seeing a decrease in their homeownership rates.”
Several factors influence homeownership rates.
“It’s affordability,” said David W. Berson, vice president and chief economist Fannie Mae-the Federal National Mortgage Association-a quasi-governmental agency that buys mortgages on the secondary market. “Buying a home hasn’t been this affordable since the early ’60s.”
Berson also cited programs aimed at first-time buyers in their 20s and early 30s, low-income renters and minorities. The percentage of mortgages taken out by first-time homebuyers is currently at its highest level since 1979, he said.
“There have been increasing efforts to reach households that have been underrepresented in the homeownership market,” he said.
“What we have been seeing in the last few years are the fruits of those efforts.”
The rise in homeownership rates, which had been climbing steadily until the decline from 1980 to 1990, is projected to continue throughout the ’90s, possibly to record levels by the year 2000.
Economists cite not only increased affordability but also the aging of the baby boomers. Homeownership rates are highest among those 50 and older.
Some also believe that there is a pent-up demand among those in their 30s and 40s who have been priced or frightened out of the market and that this demand will be unleashed by an improving economy and lower interest rates.
“The percentage will continue to go up-but slowly,” Ahluwalia said. “We expect it to go up by the end of the decade to 67 or 68 percent and some people say maybe even 70 percent.”
Demographers have attributed the decline in homeownership in the ’80s and early ’90s partly to the fact that Americans under 35 are more mobile and increasingly leaving home later, marrying later and forming smaller, less child-oriented households.
Economists, meanwhile, cite the run-up of home prices, sparked first by a period of high inflation in the 1970s and then, in the 1980s, by a surge in demand from an unprecedented number of Americans, the baby boomers.
The rise in home prices has made it hard for many younger Americans to afford a home. Saving enough for a down payment and closing costs is particularly difficult.
