Amid an uptick in the housing market, the homeownership rate is now increasing, in part because millennials are reaching the age when they’re forming families and settling down.
On the flipside, that development has helped lead to a slump in the residential rental market.
For most of the current economic expansion, declining homeownership rates have led apartment owners to raise rents far faster than the pace of inflation. But the Census Bureau last week reported that homeownership increased to 63.9 percent in the third quarter – the highest level since 2014.
Analysts and investors are now wondering whether the rental market’s good times are coming to an end.
Still, the homeownership rate remains below its historic norm of 65 percent, and future growth could be slowed by forces such as rising interest rates and last week’s tax code overhaul proposed by House Republicans. But the rise in homeownership comes as other forces weaken the rental market, including a surge in supply from developers hoping to cash in on rising rents.
In September, the seasonally adjusted rate of apartments under construction was 596,000, nearly twice the long-term average of 300,000 units, according to U.S. Census data.
Source: Wall Street Journal (11/07/17) Grant, Peter; Kusisto, Laura