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What do Falling Homeownership Rates Mean for Industry?

The homeownership rate briefly topped 69 percent in 2004, but it has been ticking down ever since.

(Boonton, NJ, December 4, 2014) — The U.S. homeownership rate has fallen to its lowest point in nearly two decades, reflecting both the hangover from the housing bubble and a shift in how younger Americans view homeownership.

So what does the future hold? It’s a crucial question for an industry that relies on new generations of buyers to snap up starter homes, then graduate to move-up homes, and later downsize to empty-nester homes.

“Surveys of renters consistently show 70, 80 percent of renters want to be homeowners,” says Lawrence Yun, chief economist at the National Association of Realtors. “Perhaps the timing is not right, because they don’t have the necessary credit scores or finances for down payments.”

Others say the stats tell a different story. The share of first- time buyers has dropped to a third, the lowest level since the early 1980s. That marks a slowing of the decades-long trend of new buyers eagerly entering the market.

What’s more, sales volumes remain well off their boomtime peak of more than 6 million homes a year. Yun says the number of renter households in the United States has increased by 4 million since 2010, while homeowner households have decreased by 1 million.

Ken Johnson, a former real estate broker and now a real estate economist at Florida Atlantic University, predicts the home ownership rate will fall to 55 percent in the coming years. If that forecast comes true, it would mark a return to the housing market of 1950, when the U.S. homeownership rate stood at 55 percent.

A full report on homeownership rates appears in the December issue of Real Estate Broker's Insider along with the new rules of real estate marketing and information on disclosure issues arising from marijuana legalization.

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