America’s trend toward renting pushed homeownership rates to 50-year lows in 2016, casting further doubts about the long-term sustainability of the recovery.
Just 63.4% of American households owned a home in 2016, the lowest rate in 50 years, according to business intelligence firm CoreLogic. There’s reason to believe the rate will continue to decline as low inventories, affordability challenges and an uneven recovery make homeownership less of a reality for many Americans.
Homeownership has been steadily dropping since the turn of the millennium, with the subprime mortgage crisis accelerating the decline. Foreclosures have dropped significantly since the worst of the crisis, but analysts say ownership rates are unlikely to rise anytime soon.
Data from Washington’s Census Bureau last year also confirmed that homeownership rates were the lowest since government began tracking the figure in 1965. Rates improved slightly in the fourth quarter, but appear to have plateaued below 64%.
The plateauing of ownership rates is caused by several factors, including razor tight housing inventories, the lack of affordable starter homes and other affordability concerns. These factors are pushing more Americans, especially debt-stricken Millennials, into the rental market. Other demographic realities, such as the rise of minority households, are also expected to exert downward pressure on ownership rates. Data from CoreLogic and others show these households have historically had lower homeownership rates.
In 2015, 52 of the 100 largest U.S. cities were majority-renter, according to Census Bureau data compiled for Bloomberg. Twenty-one of those cities became renter-dominated since 2009. This trend will intensify over the next decade as baby boomers downsize into rental units.
Some analysts have speculated that declining homeownership rates partly explain the economy’s moribund recovery over the past seven-and-a-half years. Annual growth has failed to reach 3% since the crisis. While job creation has been solid, wage growth remains weak. Homeownership is considered a major boon to the economy, fueling growth in durable goods orders and other spin-off consumption tied to real estate.
President Donald Trump has vowed to accelerate economic growth and “bring back the American Dream” of homeownership. Although less vocal about the housing market, Trump is planning to deregulate the financial industry, including reforming the Dodd-Frank Wall Street Reform and Consumer Protection Act. Repealing Dodd-Frank could increase the flow of private capital back into the mortgage market, helping to create a more competitive mortgage industry.
To help address declining homeownership levels, Wells Fargo recently announced a $60 billion lending commitment to boost homeownership the African-American community. This commitment is expected to create at least 250,000 African-American homeowners by 2027. The homeownership rate among African Americans was just above 41% in 2016. A recent research paper from Harvard University suggests that minority households will drive nearly three-quarters of all household growth between 2015 and 2025.
 Zoe Eisenberg. “Homeownership Rate Falls Slightly in Fourth Quarter 2016.” RIS Media.
 Frank Nothaft (February 8, 2017). “U.S. Economic Outlook: February 2017.” CoreLogic.
 Patrick Clark (March 23, 2017). “Renters Now Rule Half of U.S. Cities.” Bloomberg.
 Daniel McCue and Christopher Herbert (December 2016). Updated Household Projections, 2015-2035: Methodology and Results. The Harvard Joint Center for Housing Studies.