Photo: Robert Clark
High prices and rising interest rates are deterring many Americans from buying homes, but some Millennials are bucking the trend.
Despite one of the most competitive housing markets in recent history, more American Millennials are buying homes, according to an analysis of the latest Census housing data by the National Association of Home Builders (NAHB).
The national homeownership rate rose half a percentage point from last year to 64.4 percent at the end of the third quarter of 2018, but unchanged from the previous quarter.
The homeownership rate fell to a low of 62.9 percent during the second quarter of 2016 and has risen slowly but steadily since. Compared to the peak reading of 69.2 percent recorded in 2004, the current reading is still lower but about five percentage points.
“The national homeownership rate demonstrated stability during a quarter in which housing markets softened due to declining affordability conditions,” writes NAHB data scientist Na Zhao in the report.
But while the overall homeownership rate is down from historic norms, the total number of households grew by 2 million from last year to 121 million in the third quarter of 2018.
Even with record-high home prices, buyer households outpaced renter households in the third quarter.
“Newly-gained households are predominantly owner households, while renter households only increased by 60,000,” writes Zhao.
Among all age groups under 64, homeownership rates rose year-over-year in the third quarter of 2018. Millennial households — primarily first-time buyers — recorded the largest annual gains among all households, a 1.2 percentage point increase from last year.
And although the market is still highly competitive and prices — as well as interest rates — are up, NAHB reports that many Millennials are starting to buy.
“Millennials are gradually returning to the for-sale housing market, where gains in home price appreciation are starting to slowing down,” writes Zhao.
Meantime, the national homeowner vacancy rate (nonseasonally adjusted) held at 1.6 percent in the third quarter of 2018, and virtually unchanged from last year. At the same time, the national rental vacancy rate rose 0.3 percent from the previous quarter to 7.1 percent.
“Home price gains and rising interest rates are slowing down the housing market, particularly in high-cost areas and among first-time buyers who are more severely impacted by price increases,” NAHB chief economist Robert Dietz tells Livabl.
Over the next year, economists expect two more rate hikes and modest increases in home prices.