August 17, 2017
Continuing Hurdles for Individual Homeownership
by Erin Johnson
It’s been a little while since we last checked in on the state of the housing market here on In Focus, but there’s been some recent news worth paying attention to. First: Last month, the Pew Research Center released an eye-opening report that showed that more U.S. households are renting than at any point in the past 50 years.
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From Pew Research:
The total number of households in the United States grew by 7.6 million between 2006 and 2016. But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis.
Meanwhile, the number of households renting their home increased significantly during that span, as did the share, which rose from 31.2% of households in 2006 to 36.6% in 2016. The current renting level exceeds the recent high of 36.2% set in 1986 and 1988 and approaches the rate of 37.0% in 1965.
We’ve tracked some of the reasons that have held back younger homebuyers in the past, and those reasons continue to linger. The rise in renting doesn’t necessarily mean that people don’t want to buy homes—Pew additionally cites a 2016 report indicating 72% of renters would like to own in this update on renting versus owning.
Indeed, CNBC recently reported that demand for housing has continuously strengthened throughout the summer months—but affordability and availability have stopped that demand from translating into sales. The CNBC report cites figures from Redfin, an online real estate company, showing home listings as of June 2017 down about 12% compared to the same point in 2016. Additionally, “the U.S. Census shows the supply of existing homes on a per capita basis, nationwide in the second quarter of this year, was at the lowest level since 1982, when the government began tracking this data.”
In lieu of individual homeowners, those who can afford it are making bets on these trends, as The Wall Street Journal recently reported. “Big investors have spent some $40 million buying about 200,000 houses, renovating them and building rental-management business,” according to the report. “The buying spree amounts to a huge bet that the homeownership rate, which currently is hovering around a five-decade low, will stay low and that rents will continue to rise.” A continuation of this activity could be a bit worrisome—since investors can usually pony up cash, individual homebuyers are at a disadvantage. There’s potential for a price war here, and the last thing we want to see is another bubble of over-valued homes.
As it stands right now, this all leaves individual homebuyers in a bit of a pickle, and the way forward isn’t exactly clear. We’ll keep our eyes peeled as some of these trends continue to evolve.
Questions or comments? Contact me directly at Erin.Johnson@Quanex.com.
August 17, 2017 by Erin Johnson
Filed under: housing