Homeownership rates in historical perspective

Here is a Wall Street Journal headline from April 28: “The U.S. Homeownership Rate Falls Again, Nearing a 48-Year Low.”  “The homeownership rate fell slightly in the first quarter of 2016, dashing hopes that it had finally hit a bottom,” read the lead paragraph.

This sounds pretty ominous. Let’s take a closer look; first, here are the data to which the article refers:

Now, let’s pull back a bit, to the beginning of the Great Recession:

So, the decline in the home ownership rates from the last quarter of 2015 through the first quarter of 2016 continues a trend that’s been going on at least since the beginning of the recession.

Pull back again, to the end of the 2001 recession:

The ownership rate peaked in the second quarter of 2004.  Fine, but was that high?  Low?  Typical? Strange? Let’s look at the numbers for as far back as they go:

Wow, that was quite a rise between 1995 and 2004! The rate went from 63.9 percent to 68.7 percent in nine years.  It looks, however, as if rates might have been higher before 1980, so let’s switch from seasonally adjusted data (available starting in 1980) to unadjusted data (starting in 1965):

Home ownership increased from 1965 to 1980, then declined from 1980 to 1985, grew slightly from 1985 to 1996, then took off. 1980 was the outlier between 1965 and 1996, not the norm.

This is as far as FRED can take us, but let’s dig a bit deeper. One of my favorite sources is Historical Statistics of the United States: Millennial Edition; it’s not free, but if you have access to a college or university library they probably have a subscription. Fortunately, CSB|SJU has a subscription and we can look at homeownership decade-by-decade back to 1890:

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Ownership rates below 50 percent were the norm before World War II and then jumped in the 1950s and 1960s.  In other words,

  • high rates of homeownership are a post-World War II phenomenon
  • rates in excess of 65 percent are anomalous; that is, homeownership rates from the late 1990s to the mid 2000s are the outliers, not what’s going on today.

If we’re going to make good public policy, and understand our world better, it’s always important to put everyday numbers into a broader context.  Yes, homeownership rates are at a 48-year low. But, it’s the past 20 years that were weird, not today.