Homeownership Rates Struggle to Reach High Water Mark Amid Price Gains

While the bidding wars in the home sales market may remind some buyers of 2005 and 2006, homeownership rates are still not back up at the peak years from that era.

From 2005 to 2009, the homeownership rate was at its highest at 66% to 67%, according to the US Census Bureau. Then, after the housing crash, the homeownership rate fell to a low of 63% in 2015 before rising to 64.1% in 2019.

From 2009 to 2014, Arizona (6.0%), Nevada (5.7%), Georgia 94.8%), Rhode Island (4.6%) and Florida (4.4%) experienced the most significant decreases in homeownership. But overall, 31 states showed statistically significant increases in their homeownership rates during that time. Only Arkansas, Hawaii, South Dakota and Vermont showed no significant change in homeownership rate from 2009 to 2014.

With affordability an ever-increasing concern, it is debatable whether the homeownership rate will nudge higher. Emphasizing that issue is the latest S&P CoreLogic Case-Shiller US National Home Price NSA Index. In January, it reported that the home price index was the highest recorded since February 2006, just one month shy of 15 years ago.

Overall, the Case-Shiller reported an 11.2% annual gain in January, up from 10.4% in the previous month. The 10-City Composite annual increase rose from 9.9% in December to 10.9% in January. The 20-City Composite recorded an 11.1% year-over-year gain, increasing from the 10.2% posted in December.

In January, the highest year-over-year gains among the 20 cities were found in Phoenix, Seattle and San Diego. Phoenix posted a 15.8% year-over-year price increase, followed by Seattle (14.3%) and San Diego (14.2%). All 20 cities had higher price increases in the year ending January 2021 versus the year ending December 2020.

Before seasonal adjustments, the US National Index recorded a 0.8% month-over-month increase in January. The 10-City and 20-City Composites posted gains of 0.8% and 0.9%, respectively, in January. After seasonal adjustment, the US National Index’s month-over-month increase rose to 1.2%. The 10-City and 20-City Composites each tallied increases of 1.2% after seasonal adjustments. Nineteen of 20 cities reported increases before seasonal adjustments. After seasonal adjustments, all 20 cities reported increases.

“The strong price gains that we observed in the last half of 2020 continued into the first month of the new year. In January 2021, the National Composite Index rose by 11.2% compared to its year-ago levels,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI. “The trend of accelerating prices that began in June 2020 has now reached its eighth month and is also reflected in the 10- and 20-City Composites [up 10.9% and 11.1%, respectively]. The market’s strength is broadly-based: all 20 cities rose, and all 20 cities gained more in the 12 months ended in January 2021 than they had gained in the 12 months ended in December 2020.”