Too Many Homeowners?

One of the most remarkable facts about the housing bubble was the large number of renters who became homeowners. Take a look at the chart, below, which shows the nationwide homeownership rate.

The data comes from the Census Bureau, which defines the homeownership rate as the percentage of households that are owner-occupied.

The homeownership rate began increasing rapidly in 1995 and reached an all time high of 69.0% in 2004. The peak value was almost five percentage points higher than the pre-bubble average (64.3%), and more than three percentage points higher than the previous record (65.8%). The homeownership rate has declined steadily since the bursting of the housing bubble but the current rate (66.9%) is still more than two percentage points higher than the pre-bubble average.

We can't rule out secular changes that might be driving long-term increases in the rate of homeownership (although it's clear that the rapid increase between 1995 and 2004 was not attributable to long-term factors). Perhaps the aging population is causing a secular rise in the rate of homeownership. If so, then perhaps the rate will settle down at a level that's higher than the pre-bubble average. Considering the state of the economy and the over-stretched finances of US homeowners, however, I think we'll be lucky if the homeownership rate doesn't fall substantially below 64.3% during the next few years.