The U.S. homeownership rate fell for the first time in two years to just 64.2% in the first quarter of 2019, down from 64.8% in the previous quarter, according to newly released Census Bureau data.
Experts believe the falling rate might have something to do with rising home prices and a wobbling economy. Lower housing inventories may also have contributed to the dip in households, economists said. The majority of the rise in homeownership rates has been driven by younger buyers over the past couple of years, but this segment also saw one of the most significant drops in the last quarter. Buyers aged 35 and under saw their homeownership rate fall from 36.5% to 35.4% percent in the three-month period.
The homeownership rate had been on an upswing since the start of 2017 and was close to its historic average of about 65 percent prior to the latest drop, the Wall Street Journal reported.
“The homeownership rate is volatile, and it would take several straight quarters of decline to indicate owning a home is once again in decline in the U.S.,” The Wall Street Journal said. “While the homeownership rate fell over the quarter, it was virtually unchanged from a year earlier.”
In addition to the household rate drop, mortgage rates have also dropped from yearly averages, and that could help to boost the number of new households. Average mortgage rates for a 30-year fixed-rate loan have fallen from nearly 5% in the fall of 2018 to just over 4% now.
As such, the fall in homeownership rates may just be a temporary blip, according to Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. He said that millenials entering their early to mid thirties are showing “more eagerness” to buy homes than previously, though may of them face financial constraints.
“We had a really, really volatile end of 2018,” Kan told the Journal, referencing stock market swings and fears then about a slowing economy. “Most of these [younger] borrowers are going to be in tighter financial circumstances. They are going to be more vulnerable to big swings.”