Why Is the Homeownership Rate Still Falling?

Tuesday, March 22, 2016
homeownership rates
Thinkstock/BogdanVj

The homeownership rate in the U.S. continued to decline in 2015, and there are several potential reasons, according to the inaugural issue of Housing Market Perspectives: On the Level with Bill Emmons.

The national homeownership rate fell to 63.7 percent in 2015, the 11th straight year of decline following a peak of 69 percent in 2004. Emmons, an assistant vice president and economist with the St. Louis Fed, offered two possible reasons for the continued decline.

An Increase to Unsustainable Levels

Homeownership increased sharply between 1994 and 2004. Emmons noted: “Perhaps this period represented an unsustainable shift of many financially weaker families out of rental housing into homeownership, which subsequently reversed with the bursting of the housing bubble and the onset of the Great Recession.”

Supporting this theory is the fact that homeownership rates of younger, less-educated and nonwhite families—or the families that are traditionally financially weaker—have fallen by more than the overall average. These are also the families that moved into homeownership most rapidly during the housing boom.

Owning a Home Simply Isn’t as Attractive

Emmons also explained that homeownership may not be as attractive or feasible for several reasons:

  • Virtually all homeowners saw large fluctuations in house values in recent years. Millions even lost their entire investment due to foreclosure.
  • Mortgage borrowing is more difficult and expensive today.
  • Owning a home essentially means being tied to a specific area, which may not be as attractive to younger generations.

Emmons noted that this scenario could mean declining homeownership rates for years to come. “After all, homeownership rates in the low- to mid-60 percent range were unprecedented before post-World War II political and social changes turned the U.S. into a majority homeowning society.”

Conclusion

Emmons concluded by saying that it’s too early to tell which scenario is occurring. “Perhaps there are elements of both explanations at work. In any case, it appears unlikely that the U.S. homeownership rate will return to its historic peak of 69 percent anytime soon.”

Additional Resources

Posted In Housing  |  Tagged william emmonshousinghomeownershipmortgages
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.

Subscribe to
On the Economy

Get notified when new content is available on our On the Economy blog.

Email Alerts  |  RSS

About the Blog

The St. Louis Fed On the Economy blog features relevant commentary, analysis, research and data from our economists and other St. Louis Fed experts.


Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

Contact Us

For media-related questions, email mediainquiries@stls.frb.org. For all other blog-related questions or comments, email on-the-economy@stls.frb.org.

Categories