By Lucia Mutikani
Homeownership in the United States hit a 17-year low in the first quarter as more Americans opted to rent, continuing a trend exacerbated by the collapse of the housing bubble. The seasonally adjusted homeownership rate slipped to 65.2 percent, the lowest since the fourth quarter of 1995, the Commerce Department said on Tuesday. The rate, which peaked at 69.4 percent in 2004, was 65.3 percent in the fourth quarter. Economists said homeownership could decline even further given that about 10.4 million homeowners owe more on their mortgages than their homes are worth and credit is still tight.
"It's probably going to drop another point or two over the next three years because there are still a lot of foreclosures. More people are going to become renters going forward," said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass. The 2007-2009 recession, sparked by the collapse of the U.S. housing market, has left the economy with deep scars that will take long to heal. Though the recovery is now in its fourth year, it has been too sluggish to foster faster job growth.
The unemployment rate is at an uncomfortably high 7.6 percent and about 21.6 million people are either unemployed, working only part-time although wanting full-time work, or want a job but have given up the search. With so much slack in the labor market, income growth has been sluggish, contributing to a weak underlying backdrop for home purchase demand. The rental market has tightened as more people have given up on the Americans dream of owning a home.
In the first quarter, the residential rental vacancy rate eased to 8.6 percent from 8.7 percent in the last three months of 2012. It has dropped from a peak of 11.1 percent in 2009. The low ownership rate provides fresh evidence that a decisive turnaround in home sales has been driven by investors, who are snapping up properties to rent out.
See more on the homeownership rate:
Millennials Expected to Dominate Housing Market by 2020
Homeownership Still a Dream of Most Americans, Survey Says
Why Falling Homeownership May Be a Good Thing
More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
See celebrity homes.
Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.
By Lucia Mutikani