Over the course of the pandemic, it seems like everyone has purchased a home. While this might seem like the phenomenon, it is not entirely the case. Over the past year, homeownership rates have remained little changed. With the national rate of homeownership maintaining at 65.4%, the rate is still well above the average rates over the past 15 years. The rate actually declined year-over-year for the third quarter of 2021, albeit just 2%.
In the Midwest region, rates remained at the highest level nationally. The rates in the region are still above 70%, coming in at 70.9%. The next highest rates are in the Southern region, coming in at 67%, right above the national average. While housing is still affordable with rates near record lows, affordability is declining. With affordability declining throughout most regions, homeownership rates do not look to have much upward room to grow. Rates slid across the nation throughout the past year, causing fears over the boom in housing prices which is impacting homeownership rates.
With homeownership rates sliding throughout the nation, there is still sign for hope. Homeownership rates slid across the nation for all ages year-over-year. However, there were quarterly gains for the age groups of the ‘under 35′ and ’45 to 54’ categories. This is signs of hope for homeownership rates, as the Millennial and Gen X will be the future of homeowners. With increased rates in these demographics, it looks like many first-time home buyers and move up buyers remained active in Q3 2021.
Homeownership rates were bolstered by the pandemic recovery. During the stage of the housing market recovery after the pandemic started, homeownership rates rose from 65% to 67.4% from Q1 to Q3 in 2020. However, the rise in home prices in the Spring of 2021 has adversely impacted the ability to purchase a home. Because of the rise in prices and lower affordability, it became harder for first-time home buyers to purchase homes. With homeownership rates dropping back to the level seen in Q1 of 2020, there is cause for concern for future rates.
The market does seem to be starting to slow down. This is typical of the winter season, but it is the first sign of slowing down in months. The home prices seem to be cooling off, as we saw with Zillow’s big losses in Q3 2021. Buyers who have been holding out for an increase in inventory might be rewarded in the winter. Inventories are looking to tick up throughout the nation, meaning price increases will slow. With a higher housing inventory, buyers look to benefit from more choices and less competition for their potential homes.
Not only have home prices increased, buy rents might have seen the biggest increase. Because home prices have soared, rent demand has also began to soar. Rental demand has increased in both the suburbs and smaller cities. Rents have reached record high across America, increasing almost 14% from a year ago. Rental prices have been in the news as the mortgage and rent forbearance ended in Q3 2021. The prices to rent a home are, on average, $1,654 a month. This is a 4X increase from March 2020, the beginning of the pandemic. Homeowner vacancy rates are still low, around 1%. This is a slight increase from the same month the year before.