According to the U.S. Census, the homeownership rate in 2015 first quarter dropped to 63.7 percent, its lowest since 1990 or in 25 years, reports CNBC.
The site defines homeownership rate as "the ratio of households that [are] own[ed] to overall households"---with the remaining households belonging to rentals."
On Tuesday, the Case-Shiller Home Price Index has revealed that home prices increased by 4.2% nationally, tracking all nine Census divisions, reports Forbes. The outlet adds that here is also home appreciation in 20 major American cities with single-family home prices in these areas posted a year-over-year 4.8% in February compared to a 4.3% increase in January. The news site also mentioned another index that tracks 10 cities showing a 5% gain in February, against a 4.5% jump in January.
The questions is: If home prices are rising, it would simply indicate that there is an ongoing and increasing demand for homes but with the data revealed by the U.S. Census, how is this possible?
The U.S. Census explains that this is the current findings despite the fact that there is no actual drop of people owning homes, as CNBC reported. Rather, the rise in renters just made the pool of total households bigger, making the ratio of the households owned to the pool of total households smaller.
CNBC notes that the number of people renting has increased significantly and this scenario is expected to persist even as economy improves because "more kids move out of their parents' basements and into rental apartments."
"Inventory remains tight in many markets and that's helping keep a floor under price gains. Because of demographics and a strengthening job market for young adults, there is very strong rental demand, " Jed Kolko of Trulia told CNBC.
Thus, we must be watching a new factor which is employment rate. Bill Banfield, vice president at Quicken Loans told Los Angeles Times, "Home prices are continuing the familiar narrative, showing modest annual gains and slow, healthy, monthly increases. Employment remains one of the most watched issues impacting the housing market as there are concerns of price increases outpacing wage growth."
This is concurrent to what David Blitzer, of S&P Dow Jones Indices, said to CNBC. "Home prices continue to rise and outpace both inflation and wage gains. If a complete recovery means new highs all around, we're not there yet."
However, with renting as the dominant trend on the market, it only promotes higher rents, notes the site. With such high rents, more renters who want to have their own homes could not even save for their home deposit. As CNBC explained, historically, the first-time buyers increase the homeownership rate, but right now, they are still a "small share of today's buyers."
Yes, unfortunately, these supposed first-time buyers are still on the larger part of the pie, as renters, hoping to cross the line one day. But with these increasing prices, the journey is expected to be more difficult.
