New statistics from the Commerce Department show that the homeownership rate has fallen to its lowest level in 20 years.
63.9 percent of U.S. households owned their homes in Q4 2014, down from a rate of 65.1% one year earlier. The last time homeownership was that low was in 1994. “We just have homeownership in our DNA and that’s why we’re so focused on this figure,” says IHS Economist Patrick Newport.
Given the national obsession with homeownership, this may seem like bad news, but the thinking on the importance of home ownership is changing, as well as what it says about the broader health of the U.S. economy.
Newport points out that previous levels of homeownership were probably too high, due in part to all of the crazy loans and mortgage deals that banks were offering. Homeownership is kind of a squishy measure of economic health anyway. “It’s not bad news for the economy,” says Newport, “it’s a matter of who owns the paper, the title to the home that you live in, and what we’re seeing now is a trend toward landlords owning that piece of paper, not the homeowner.”
Newport says the rate may yet dip even farther, since many foreclosures have yet to work their way through the system.
Another explanation for the dip in homeownership might be because there are just more households in the U.S. — and by “household,” we’re talking about the government definition, meaning a person, or couple, living on their own.
“Young people are going off on their own, getting out of their parents’ basements,” says Washington University Economist Steve Fazzari. More households means people are getting jobs. “So, if we have more households for that reason, that’s really a sign of some good economic activity,” Fazzari says.
The real concern with housing, he says, should be construction and new housing starts, which are lagging, and have been the key to every economic recovery since World War II.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?