US Homeownership Rate Drops To 1983 Levels: Here’s Why

The last time US homeownership declined down to 64.4% (which the Census Bureau just reported is what US homeownership declined to from 64.7% in Q2), was back in the fourth quarter of 1983.

It goes without saying that this is about the bearishest news possible for those few who still believe in the American homewonership dream.

Of course, those who have been following real-time rental market trends would be all too aware there is no rebound coming to the homeownership rate. The reason is simple: increasingly fewer can afford to buy, instead having no choice but to rent, which in turn has pushed the median asking rent to record highs. In fact in the past two quarters, the asking rent was just $10 shy of its time highs at $756 per month.

But capital allocation preferences aside, while explaining the disparity between rental and homeownership in a world where Renting is the new American Dream, what the charts above don’t explain is why there is no incremental demand from all those millions of young Americans who enter the population and, eventually, the workforce. At least on paper.

Earlier today, Bank of America in its Chart of the Day earlier was confused by precisely this:

Population growth of 25-34 year olds outpacing growth in the housing stock: The primary driver of household formation is population growth among 25 to 34 year olds. There is notable divergence with the growth in this age group and the growth in the housing stock. This suggests greater doubling up of households as a result of the recession and weak recovery. Unless doubling up turns into tripling up, household formation should recover over time, creating a need for greater building. Given tight credit conditions, this will tend to drive apartment construction more than single family construction. Either way, the housing stock is lagging well behind demographic fundamentals.

Yes, in theory, in a normal world, demand should increase over time. But the world is anything but normal.

Enter: the Millennials.

For the benefit of a very confused Bank of America, and everyone else who missed out weeked chart porn on the financial state of the Millennial, here are some of the key charts which explain why owning a home in the US has become a mirage for an entire generation of Americans. Incidentally, the largest generation in US history.

This is what is happening: