A larger number of Americans—notably fueled by millennials—entered homeownership during the summer months. The national homeownership rate rose to 64.4 percent in the third quarter—a half percentage point higher than a year ago, the U.S. Census Bureau reported this week.
The increase was largely attributed to a rise in first-time buyers as more millennials entered homeownership. The ownership rate among those under the age of 35 climbed from 35.6 percent in the third quarter of 2017 to 36.8 percent in the third quarter, according to the bureau’s report.
“More people are choosing homeownership over renting, and a large part of that story is the historically large number of first-time home buyers,” says Tian Liu, Genworth Mortgage Insurance’s chief economist. “In the past two years, first-time home buyers have purchased at least 1.9 million homes each year. That is more than the pace of household formation over the same period, meaning that the transition from renting to owning is the more powerful driver of housing demand.”
Liu says that has been an often overlooked reason for the rapid increase in home prices. “Paradoxically, the rise of first-time home buyers, which has pushed home prices up, also is slowing home sales today.” Liu says. “These events caused the homeownership rate and home sales to diverge this quarter.”
However, the homeownership rate among several age groups did see a drop in the third quarter. For example, the ownership rate of those between ages 35 to 44 dropped slightly from 60 percent in the second quarter to 59.5 percent in the third quarter. The ownership rate of those between the ages of 45 to 54 years old also saw a drop, decreasing from 70.6 percent in the second quarter to 69.7 percent in the third quarter.
On the other hand, Americans between the ages of 55 and 64 and those who are 65 and older both saw increases in ownership rates in the third quarter.
Despite the overall uptick in the ownership rate in the third quarter, homeownership still remains far from its all-time high of 69.1 percent set in 2004. The homeownership rate has shown gradual improvement since hitting bottom at 62.9 percent in 2016.