Homeownership Rates Decline Despite Record Affordability

Homeownership rates fell to 66 percent in the fourth quarter of 2011, sliding .3 percent from the third quarter of the year, according to data released today by the U.S. Census Bureau. The share of Americans owning their own home has fallen despite record affordability and signs of a changing vision of the American Dream.

Homeownership rates hit a year low of 65.9 percent in the second quarter of 2011, a low not seen since 1998 when homeownership hovered around 66 percent for the first two quarters of the year. Homeownership peaked in the run up to the housing crisis, reaching 69 percent toward the end of 2004.

Homeownership is highest among Americans age 65 and older, according to the Census Bureau, which reports that 80.9 percent of these senior citizens own their own home. The rate falls steadily with age and is 62.3 percent for Americans between the age of 35 and 44, and 37.6 percent for Americans age 35 and younger.

Homeownership is declining despite record affordability, as tracked by the National Association of Realtors (NAR), which measures how affordable a median prices home is to a median income family. Record low interest rates and depressed prices have made home prices the most affordable they’ve been in decades, according to the association, but tight lending standards continue to keep all but the most qualified buyers from obtaining financing to buy a home. The share of first-time home buyers entering the market has dropped from 50 percent in 2010 to 37 percent in 2011, while the average age of the typical buyer jumped from 39 years in 2010 to 45 years in 2011, according to the association.

As homeownership eludes a greater share of younger and first-time buyers, the popular definition of the American Dream seems to be shifting away from a vision of owning a home to a vision of a secure retirement. More than 63 percent of the 1,286 investors surveyed by Millionaire Corner in January define the American Dream as equal opportunity for all people and having sufficient money for their golden years. More than 55 percent say educational opportunities are an important facet of the American Dream, while the prospect of owning a home ranks fourth in importance, followed by job security and upward mobility for future generations.

Owning a home takes on greater significant for younger survey participants. Nearly 60 percent of investors under the age of 40 rank homeownership along with an equal opportunity for all people as the top two defining characteristics of the American Dream.