U.S. Moves Toward Home ‘Rentership Society,’ Morgan Stanley Says

The U.S. homeownership rate has fallen below 60 percent when delinquent borrowers are excluded, a sign of the country’s move toward a “rentership society,” Morgan Stanley said in a report today.

The national rate, which stood at 66.4 percent at March 31, would be 59.7 percent without an estimated 7.5 million delinquent homeowners who may be forced into renting, according to Morgan Stanley analysts led by Oliver Chang. The lowest U.S. homeownership rate on record was 62.9 percent in 1965, the first year the Census Bureau began reporting the data.

The homeownership rate reached an all-time high of 69.2 percent in 2004 as relaxed lending standards fueled home sales and President George W. Bush promoted an “ownership society.” Mortgage delinquencies, foreclosures and tighter credit for housing loans are reducing property buying, Chang said.

“Taken together they are forcibly moving the country away from being an ownership society,” Chang, based in San Francisco, said in an e-mail. “This change is only beginning, and is moving the country towards becoming a rentership society.”

U.S. existing-home sales dropped 0.8 percent in June to an annual pace of 4.77 million, a seven-month low, the National Association of Realtors reported today. The median projection in a Bloomberg News survey called for an increase to 4.9 million.

Apartment Demand

The shift provides opportunities for builders of multifamily homes and investors in single-family houses leased to renters, Chang said in a phone interview. The U.S. apartment vacancy rate fell to 6 percent in the second quarter, the lowest in more than three years, research firm Reis Inc. said July 7.

Most Americans still aspire to own their houses and don’t want to be renters forever, said Rick Davidson, president and chief executive officer of Century 21 Real Estate LLC in Parsippany, New Jersey.

“It isn’t about the financial aspects, but about building a family and having a part of the American dream,” Davidson, whose company is a unit of Realogy Corp., said today during an interview at Bloomberg’s offices in New York. “What really drives purchases at the end of the day is emotional and has to do with lifestyle.”

There were 112.2 million U.S. households at the end of March, according to the Census Bureau. Almost one-third of the country’s 76 million homeowners had no debt or mortgage on their home as of 2009, the most recent year for which the data are available.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.