Join Brian, David, and WTMJ’s Mark Seigrist as they tackle the tough questions and take a deep dive into homeownership rates, the Milwaukee real estate market, home affordability, and Habitat for Humanities impact on the community.
U.S. Census released their latest numbers for homeownership rates – Q4 of 2018
This is a relevant topic to every homeowner and home shopper because it describes the demand side of the most important economic concept ever – the concept of supply and demand which of course directly impacts home prices. Some home shoppers are actually thinking home prices might drop, but they’re reading articles based on the west coast housing market where prices have gotten out of hand. (data source)
- Nationwide 64.8% of occupied residential housing units are occupied by their owner.
- The Census Bureau estimates there are currently 138.8 million residential housing units in America, 1.1 million more than a year ago.
That’s good but still not enough, especially in the more affordable price ranges.
- 12% or 1 out of 8 of the housing units are currently vacant because they’re either for rent but not rented out yet, they’re for sale, or maybe they’re vacation homes or whatever.
Both of those figures were higher than I would have suspected.
- There are 3 million vacant housing units available for rent nationwide and the median asking rent is just a hair under $1,000 a month.
- 2% of the units or 43 million are occupied by renters. Of course, that means 88% of the nations housing units are currently occupied.
- 8% of the occupied housing units or 79 million are occupied by owners
How does the latest homeownership rate of 64.8% compare to recent history?
The High point was not in 2006 and 2007 which was the height of the liar loan era and what I would have guessed. The high point was actually the fourth quarter of 2004 when 69.2 percent of America’s occupied housing units were occupied by owners. So we’re still 4.4% below that peak level, which one might argue was too high because it was too easy to get a mortgage.
What about the low point for homeownership?
I would have guessed that the low point would have been 2012 which was the peak of the foreclosure crisis, but it happened in the middle of 2016 when it dipped to 63%. That’s not because mortgage rates were high in 2016, the 30-year fixed rate was in the 3.5% to 3.75% range that year. Super low. It had to do with millennials not yet being ready to buy homes.
So what’s the ideal homeownership rate?
Not sure, but here are a few other very telling nuggets:
- In the western part of the country and the Northeast where home prices are the highest, the homeownership rate is only 61%.
- In the south, Its 66% and here in the Midwest, we’re at 69.3%
- so 7 out of 10 housing units in the Midwest are owner-occupied.
If we look at homeownership by age range, the driving factors are millennials and Gen Xers.
- In the under the 35-year-old category, we moved from a low of 34% 3 years ago in 20-16 up to 36.5% now, so up 2.5 percent and that’s on the largest demographic group of people. HOW OLD WERE YOU MARK WHEN YOU BOUGHT YOUR FIRST HOME? We had no business buying a home in 1984 when we were 22 years old.
- In the 35 to 44-year-old age range Gen X, the homeownership rate has grown from a recent low of 58% up 3 points to 61% today.
- Homeownership rates for 45 to 54-year-olds is about the same as always at 70%, then it jumps to 75% for 55 to 64-year-olds and 79% for seniors.
Two more homeownership rate nuggets that surprised me:
- Household income greater than or equal to median family income for the census tract – 79%
- Under median income: 51%
That’s why Fannie Mae, Freddie Mac, and WHEDA all have special lower rates for borrowers earning less than the area median income, which in SE Wisconsin is $77,300. But the problem is the lack of supply of homes for sale in the more affordable price ranges.
The homeownership rates by race and ethnicity also vary a lot more than I would have expected.
- For Non-Hispanic whites, the homeownership rate is 73.6%
- For Asian, native Hawaiian and Pacific Islanders it’s 58%
- Hispanic: 47% and black or African American 43%.
Bottom line is that in most popular and affordable price ranges which in SE Wisconsin is between $100,000 and $450,000, there will continue to be upward pressure on home prices because there are more eager buyers than there are sellers.
Home Affordability in the Milwaukee Metro Area
If your household income is the area median of $77,300, and let’s say you have two car payments and some student loan payments all totaling $700 a month, you can, in fact, afford the median priced single-family home in the 5-county Milwaukee metro area which sold for $222,000 last year.
If the property taxes were $4,440 a year and homeowners insurance cost $750, your total monthly payment including taxes, insurance, and monthly mortgage insurance on a 30-year fixed rate at 4.5% with just 3% down would be $1604 a month. The Annual percentage rate is 4.85% because of monthly mortgage insurance. With that $1600 monthly payment, our hypothetical buyer would be spending 25% of their gross monthly income.