Weak Household Formation Hampers Housing

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Between the high number of foreclosures, lack of inventory, the increase in home prices and higher mortgage rates this is really no surprise. Please read the article below and let me know what you think.

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The number of households owning homes rose a scant 32,000 in the second quarter, but the homeownership rate remained at 65.0 percent, the lowest level in 18 years, the Census Bureau reported Tuesday.

At the same time, the Census Bureau data showed the number of new household formations dropped dramatically in the first half of the year, an average of about 500,000 new households per month compared with 1.4 million new households per month in 2012.

The homeownership rate peaked at 69.2 percent in the second quarter of 2004. The rate measures the proportion of households owning their primary residence and is computed by dividing the number of household that are occupied by owners by the total number of occupied homes.

The Census Bureau also reported the homeowner vacancy rate fell to 1.9 percent in the second quarter from 2.1 percent in the first quarter. The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant and for sale.

The Census data paints a grim picture for the home sales market, which has already been struggling against mortgage restrictions and weak inventory. The Census report suggests homeownership may have lost its place in the “American dream” as a new generation of potential home buyers may have become wary of homeownership as a result of the wave of foreclosures in the last several years.

If the monthly average of new households continues for the rest of the year, it would mark the weakest year for household formation since 2010, when the monthly average was 443,500 new households.

To read the complete article – please use the link below.

Weak Household Formation

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