The share of Americans who own their home dropped again last year, but that decline is not being driven by foreclosures pushing people out of the real-estate market. Instead, more people appear to be rejecting the idea of a home as an investment.
About 66.5% of U.S. households owned their home at the end of 2010, down from 67.2% in 2009. The rate was 69% at the end of 2005, according to the U.S. Census Bureau.
The main driver of last year’s drop was the substantial rise in renters. The number of homeowner households dropped by just 30,000 in the fourth quarter last year compared with a year earlier, but 1.1 million renter households were added in that time period.
“We’re keeping steady on the total number of homeowners at 75 million, but all of the [household] additions are renters so the ratio goes down,” said David Crowe, chief economist for the National Association of Home Builders. It’s the younger demographics where homeownership rates are falling most, while the rate among those ages 55 and older have been more stable, he pointed out.
Popular reasons for why people are choosing to rent rather than buy have been widely reported: Some Americans remain concerned about home prices falling more, while others remain uncertain about the stability of the job they have. And for some, tighter credit standards for mortgage loans have been a factor.
But there might be another trend here, one that could have legs even after the economy recovers and housing markets are looking stable again: A return to making purchase decisions based on what is appropriate for the individual’s situation — not based on an expected return on investment.
“Traditionally, housing choices in the U.S. have been made based on need — what is the appropriate housing for your lifestyle,” said Greg Willett, vice president of research at MPF Research, a provider of market intelligence and insights for the multifamily housing industry. “During the boom period… [people] got off track.”