The national homeownership rate rose slightly from its lowest level in half a century in the second quarter of 2016 to 63.5% in the third quarter, but it is still behind the 63.7% rate a year ago, according to data released Thursday by the U.S. Census Bureau.
There were more than 1.1 million household formations in the third quarter, up from 944,000 in the second quarter and with more than half (561,000) of them owners.
Individuals under the age of 35 accounted for 35.2% of homeowners during the third quarter, on par with a year ago but up slightly from the first (34.2%) and second (34.1%) quarters of 2016.
Following a 51-year low in the second quarter of 2016, the U.S. homeownership rate is on the rise — but only slightly. Of the 1.1 million households formed (occupied) during the period, 55.5% were owners versus 31.9% that were renters. Creating more homeowners than renters is key to recovery in the housing market and, ultimately, raising the homeownership rate, which peaked at 69.1% in 2005.
Other reports this week indicate that the tide may be shifting, albeit slowly, to homeownership for more people. Pending home sales — for which a contract is signed but the deal hasn’t closed — were up 1.5% from August to September, better than analysts had anticipated, and 2.4% from September 2015. Sales of previously owned homes also rose in September, up 3.2% from August and 0.6% from a year ago, on the strength of first-time buyers, which took their largest share of sales in more than four years.
A cooling in multifamily activity pulled housing starts down 9% to an annual rate of 1.047 million in September while single-family was up 8.1% for the month and 5.4% from a year ago, indicating ongoing demand for new construction. Building permits, which offer a gauge of the pipeline for future construction activity, were up 6.3% from August and 8.5% from September 2015 to 1.225 million last month.
Meanwhile, supply-side headwinds including tight existing inventory, slow gains in new construction activity and a shortage of skilled labor are pushing up home prices nationwide. Home prices were up 5.1% in August from a year earlier and are 0.1% off their peak in July 2006, according to the S&P Core Logic Case-Shiller U.S. National Home Price Index.