Monday, May 5, 2014

Homeownership in Colorado falls again in 2013

According to the most recent data from the Census Bureau, the homeownership rate in Colorado fell again in Colorado, dropping to 64.4 percent, which was the lowest rate reported since 1997 in Colorado.  The national homeownership rate during 2013 65.1 percent. During 2012, the homeownership rate was 65.3 percent in Colorado and 65.4 percent nationwide. Nationally, the 2013 homeownership rate was the lowest rate reported since 1995.

The first graph shows annual homeownership rates since 1984. In Colorado, the homeownership rate has fallen every year since 2003, and nationally, it has fallen every year since 2004.

When people think of declining homeowership rates, they often think of foreclosures and people being unable to afford home purchases. These are certainly factors, but they are not the only ones. We can indeed look to foreclosures and a general weakness in the economy when we see the low homeownership rates of the late 1980s in the first graph. When we examine more recent trends in homeownership rates, however, it is likely that an expansion of a younger population interested more in multifamily housing is also a major factor.

If we look at the homeownership rate a second way, we can see this at work. The second graph shows the trend in renter-occupied units. This is just the homeownership rate subtracted from 100. Here we see that the growth in occupied rental units has been increasing since 2002, but it still does not reach where it was in 1989.

We can note that in 1989, home prices in Colorado were faring quite poorly, but the proportion of residents who were renters remained quite high, as a result of a weak economy in 1989. Today, however, renters continue to grow. In the current cycle, as opposed to 1989, home prices are growth quickly (8 to 10 percent year over year) and show a different dynamic at work.