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Homeownership Rate Drops to 48-year Low

U.S. homeownership dropped to a 35-year low in the second quarter as more Americans opted to rent, but the decline in ownership was probably close to running its course against the backdrop of a tightening labor market.

The seasonally adjusted home ownership rate fell to 63.5 percent, the Commerce Department said on Tuesday. This is the lowest for the seasonally adjusted series which started in 1980.

The unadjusted series goes back to 1965. The drop in ownership underscores the damage inflicted on housing by the recession and the economy's subsequent slow recovery from the downturn.

"The trend is not going to continue. We think that the homeownership rate is close to bottoming out, but we don't expect it to start rising substantially before 2017," said Andres Carbacho-Burgos, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The homeownership rate peaked at 69.4 percent in 2004. It was at 63.8 percent in the first quarter. Carbacho-Burgos cited a tightening labor market as one of the main reasons to be optimistic about housing.

The erosion of homeownership was evident in every age group except those under age 35.  It ticked up from 34.6 percent to 34.8 percent for that cohort which always posts the lowest rate,   but was still below that of any quarter in 2014.  Even those over age 65 where homeownership is consistently the highest, fell a half point to 78.5 percent.

Homeownership was highest in the Midwest at 68.4 percent. The South was second highest at 64.9 percent followed by the Northeast at 60.2 percent and the West at 58.5 percent  Rates in all regions were down from a year earlier and down from the previous quarter in all but the West which was unchanged.

Homeownership among those classifying themselves as Black only or as Hispanic rose compared to the previous quarter from 41.9 to 43.0 percent for Black only and from 44.1 to 45.4 percent for Hispanics.  For those who said they were non-Hispanic White only the rate slipped from 72.0 to 71.6 percent but the rate among all other races fell sharply, from 55.4 percent to 52.6 percent. 

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