Despite decreasing housing costs among homeowners and increased cost burden for renters, it seems the national homeownership rate is continuing to decline while the number of renters is growing. Fannie Mae released its latest edition of Housing Insights Thursday, which breaks down the supply and demand landscape of the housing market.
Five years after the housing decline began, there continues to be a shift from homeownership to rental occupancy. In fact, the national homeownership rate has declined for four consecutive years, dropping 2.6 percentage points from 67.2% 2007 to 64.6% in 2011.
Digging even deeper, Fannie revealed that young households, houses with people ages 25 to 44, are seeing the biggest drop in homeownership rates.
Conversely, between 2007 and 2011, the number of single-family renters living in detached homes increased by 2%, more than any other building type. This growth in renters occurred even with rising rental costs. Fannie’s report shows that the number of renters paying at least 30% of their income for housing increased from 2010 to 2011.
However, due to factors such as record low mortgage rates, the percentage of homeowners with affordability problems declined over the same time.
So why are people continuing to rent instead of buy homes? Before the Great Recession, the homeownership rate increased continually for a decade, while rental housing demand stood still. As a result of the housing crisis, the demand landscape has changed. The decline in homeowner affordability problems reflects the exit from homeownership by many who could not sustain their housing cost burdens during the recession.
As the housing market continues to recover, it is hopeful that the homeowners forced to give up their homes during the recession will return to homeownership and take advantage of low mortgage rate opportunities. It seems that with a decline in affordability issues for homeowners, more renters should reconsider homeownership.