Homeownership Rate Falls to 12-Year Low; Young Households Favor Apartments


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Research Brief
March 2017
Developing Trends
Homebuilders recognize the need for starter homes. The size of a newly constructed single-family home fell 1.6 percent to 2,426 square feet last year. Increased starter-home deliveries would bring relief to the market, but high development costs prevent projects from moving forward.
Single-family permitting issuance dipped slightly from December but remains up 11.1 percent from January 2016. Single-family home starts also advanced 6.2 percent year over year. Rising building activity is good for multiple sectors of the economy as hiring in finance and construction increases while spending at building supply, home improvement and furniture stores also climbs.
Nearly 290,000 apartments were added to inventory during 2016 and strong absorption pushed vacancy down 20 basis points to 3.9 percent. Supply additions will peak this year. Multifamily permitting issuance and starts, however, are slowing, as development lending tightens, suggesting building will taper in 2018.
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Homeownership Rate Falls to 12-Year Low;
Young Households Favor Apartments
Low inventory is restraining sales of existing single-family homes, which rose in January by just 3.7 percent from last year. Despite an uptick in listings, the supply of available homes for sale held firm at a record-low 3.6 months. Healthy demand for homes lifted the median price 7.3 percent year over year to $230,400. Increased inventory could help alleviate some pressure, boosting sales activity and moderating home price appreciation. The homeownership rate fell for a 12th consecutive year in 2016, resting at 63.7 percent in December and declining 550 basis points from its peak. Among those under age 35, the prime renter cohort, the rate fell to 34.5 percent, down from a high of 43.1 percent in 2004. Young households’ increased propensity to rent fuels apartment demand, and the absorption of 294,100 units in 2016 was the fourth highest year on record.
$230,400 Median price of existing single-family home in January 2017 3.6 Months of supply at current sales pace in January 2017
Sources: Marcus & Millichap Research Services; U.S. Census Bureau; MPF Research; National Association of Realtors; National Association of Home Builders
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