Homeownership Rate Fell to 64.5% in 2014, Says JCHS

Cambridge, MA, June 24, 2015—The fledgling U.S. housing recovery lost momentum last year as homeownership rates continued to fall, single-family construction remained near historic lows, and existing home sales cooled, concludes The State of the Nation’s Housing report released by the Joint Center for Housing Studies of Harvard University. 

In contrast, rental markets continued to grow, fueled by another large increase in the number of renter households. However, with rents rising and incomes well below pre-recession levels, the U.S. is also seeing record numbers of cost-burdened renters, including more renter households higher up the income scale. 

“Perhaps the most telling indicator of the state of the nation’s housing is the drop in the homeownership rate to just 64.5% last year,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “This erases nearly all of the increase from the previous two decades. In fact, the number of homeowners fell for the eighth straight year, and the trend does not appear to be abating.” 

The flip side of falling homeownership rates has been exceptionally strong demand for rental housing, with the 2010s on pace to be the strongest decade for renter growth in history. While soaring demand is often attributed to the millennials’ preference to rent, households aged 45–64 in fact accounted for about twice the share of renter growth as households under the age of 35. Similarly, households in the top half of the income distribution, although generally more likely to own, contributed 43% of the growth in renters. 

The other byproduct of this surge in rental demand is that the national vacancy rate fell to its lowest point in nearly 20 years. Given the limited supply of rental units, rents rose at a 3.2% rate last year—twice the pace of overall inflation. “To meet this demand, construction started on more multifamily units in 2014 than in any year since 1989,” says Daniel McCue, a senior research associate at the Joint Center. “And if job growth continues to pick up, we could see even more demand, as young adults increasingly move out of their parents’ homes and into their own apartments.”