U.S. Homeownership Rate Falls on Higher Costs for Buyers

The homeownership rate in the U.S. declined in the fourth quarter as higher borrowing costs and tight credit blocked many first-time buyers.

The share of Americans who own their homes was 65.2 percent, down from 65.4 percent a year earlier and 65.3 percent in the previous three months, the Census Bureau said in a report today. The rate is hovering close to the levels of the mid-1990s and dropped to 65 percent in the first quarter of 2013.

Rising real estate values and mortgage rates that jumped from near-record lows are making homes more expensive, while strict lending standards reduce the pool of potential buyers. Home prices in 20 U.S. cities rose in November from a year earlier by the most since February 2006, according to the S&P/Case-Shiller index released this week.

Slideshow: Priced Out! Where Higher Rates Could Hurt the Most

“The number of first-time buyers are just not there, and the few who are there are getting balanced out by a person who is being foreclosed on, so there’s no net increase in homeowners,” Lawrence Yun, chief economist for the National Association of Realtors, said yesterday in telephone. “And tight underwriting standards are keeping renters in their current renting situation.”

Contracts (USPHTMOM) to buy previously owned houses fell in December by the most since May 2010, the Realtors group reported. First-time buyers accounted for 27 percent of completed purchases last month, down from 30 percent a year earlier.

Mortgage Rates

The average rate for a 30-year fixed mortgage was 4.32 percent this week, up from from 3.35 percent in early May, according to data from Freddie Mac. It reached a two-year high of 4.58 percent in August.

Minorities, who were among the hardest hit in the housing crash, remain behind as the market revives. In the fourth quarter, the homeownership rate for blacks fell to 43.2 percent from 44.5 percent a year earlier, according to today’s Census Bureau report. The rate for whites dropped to 73.4 percent from 73.6 percent.

The U.S. homeownership rate for all Americans peaked at 69.2 percent in June 2004, according to the Census Bureau. The seasonally adjusted rate in the three months through December was 65.1 percent, unchanged for three straight quarters.

The homeowner vacancy rate, the share of properties empty and for sale, rose to 2.1 percent in the fourth quarter from 1.9 percent a year earlier, Census Bureau data show. The vacancy rate for rented homes decreased to 8.2 percent from 8.7 percent in the fourth quarter on 2012.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

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

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