The U.S. homeownership rate fell to the lowest in more than two decades in the fourth quarter as many would-be buyers stayed on the sidelines, giving the rental market a boost.
The share of Americans who own their homes was 64 percent in the fourth quarter, down from 64.4 percent in the previous three months, the Census Bureau said in a report. The rate was at the lowest since the second quarter of 1994, data compiled by Bloomberg show.
Rising prices and a tight supply of lower-end listings have put homes out of reach for some entry-level buyers, who also face strict mortgage standards. The share of U.S. homebuyers making their first purchase dropped in 2014 to the lowest level in almost three decades, the National Association of Realtors reported last week.
“The improving economy helps, though affordability is a growing challenge,” Jed Kolko, chief economist for San Francisco-based Trulia Inc., said in an interview Wednesday. “I suspect we’re closer to the bottom” of the ownership declines.
The rental market has benefited from the slide in homeownership. The vacancy rate for rented homes in the U.S. fell to 7 percent in the fourth quarter, down from 8.2 percent a year earlier and the lowest since 1993, according to the Census Bureau report. In the West, the tightest U.S. region, vacancies dropped to 4.8 percent from 6.3 percent a year earlier.
The number of U.S. households grew by 1.66 million in the fourth quarter from a year earlier, according to the report. While the number of owner-occupied homes fell 0.5 percent, renter-occupied units climbed 5 percent. That indicates young people striking out on their own became leasers rather than buyers, according to Kolko.
The homeownership rate has fallen from a peak of 69.2 percent in June 2004. From 1965 to 1999, the average was 64.5 percent, data compiled by Bloomberg show.