Americans continue near-record home buying spree amid COVID-19 and recession

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Rick Nazarro of Colonial Manor Realty chats with a pair of interested buyers who are waiting to enter a property on May 2, 2020, in Revere, Massachusetts, for an open house conducted under COVID-19 protocols. (Blake Nissen for The Boston Globe via Getty Images)

The American dream of homeownership has not been dampened by the COVID-19 pandemic and the economic downturn it caused.

In the fourth quarter of 2020, there were approximately 82.8 million owner-occupied households in the United States, according to a recent publication Census Bureau data. The number of owners increased by approximately 2.1 million compared to the previous year. Based on unadjusted fourth quarter data, this corresponds to the largest previous net increase in homeowners that occurred during the housing boom between 2003 and 2004 (2.1 million).

After falling the day after the coronavirus epidemic, sales of existing homes in the United States rebounded and annual sales hit their highest level since 2006. Strong residential real estate activity raises question of whether pandemic is associated with an expansion in homeownership .

The number of occupied dwellings and owners comes from the Current demographic survey / Survey of vacant dwellings. This survey is not the only Census Bureau survey to provide estimates homeownership rate, but it is the only one to generate estimates on a quarterly basis rather than annually. The number of homeowners and homeownership rates use revised estimates from the second quarter of 2000. The bureau has not released revised estimates for the quarters leading up to the second quarter of 2000.

The coronavirus pandemic has had an impact on the data collection on homeownership in 2020. Households are part of the survey sample for a total of 8 months. They are interviewed in person twice. The Census Bureau suspended all face-to-face interviews from March 2020 to June 2020. Instead of face-to-face interviews, the bureau attempted to conduct telephone interviews. Personal interviews resumed from July in parts of the country and, by September, were possible across the country. For the months of November and December, in-person interviews have been suspended in some areas. As a result, response rates to the survey were lower than before the pandemic. The response rates for October, November and December 2020 were 81%, 80% and 77%, respectively. The average response rate for the same months of 2019 was 84%.

Changes in data collection procedures may have affected the estimates of the homeownership rate for the fourth quarter of 2020. Based on the full sample, the homeownership rate has changed. increased by 0.7 percentage point compared to a year earlier. The Census Bureau released additional estimates for the fourth quarter of 2019 and 2020 where the sample was limited to regions where face-to-face interviews were permitted in the fourth quarter of 2020. On this basis, the estimated homeownership rate increased by 0.4 points.

2019 median estimates adjusted household income were derived from 2020 Current demographic survey, Annual social and economic supplements (ASEC). ASEC microdata files have been provided by IPUMS at the University of Minnesota. Estimates are in 2019 dollars and scaled to reflect a three-person household.

The ranks of US homeowners have increased by 2 million in the past year

Part of the growth in home ownership is attributable to the overall growth of the economy and the number of households in the United States over time. The addition of 2.1 million homeowners in 2020 represents an annual increase of 2.6%. This is the seventh largest percentage increase in the number of homeowners since 1965.

A significant portion of the increase in homeownership has occurred since the coronavirus outbreak began in February. The net number of owners is up 1.6 million since the first quarter of 2020.

Unsurprisingly, the boom in homeownership has also boosted homeownership rate. In the fourth quarter of 2020, 65.8% of households own their homes, up from 65.1% a year earlier. This 0.7 percentage point increase in the homeownership rate is not the largest on record (the rate increased 0.9 percentage points from 1994 to 1995), but it is nonetheless significant.

Homeownership rate has increased dramatically over the past year

The homeownership rate in 2020 remains below the all-time high of 69.2% in 2004. Dating back to 1965, the homeownership rate averages 65.3% (according to data from the fourth trimester).

The increase in the homeownership rate over the past year has been more pronounced among certain demographic groups. It increased by 1.2 percentage points for households headed by a person aged 65 or over. At the same time, the change in the rate among households in the younger age groups was not statistically significant.

Homeownership increase larger among households headed by people aged 65 and over and in the Midwest, South

Homeownership among households with a white head of household increased by around 0.8 percentage point from 2019 to 2020. But the rates for heads of households of another race or ethnicity remain significantly lower than the previous year. white homeownership rates and have not increased significantly. The homeownership rate in Asia now stands at 59.5%; the Hispanic rate is 49.1%. The rate for black headed households is 44.1%, well below the peak of 49.4% in 2003.

The increase in the homeownership rate from 2019 to 2020 was larger for households with family income below the national median. The rate increased by 0.9 percentage point for these households, compared to an increase of 0.6 percentage point for better-off households (the latter not being statistically significant).

Homeownership rates continue to be higher in the Midwest and South than in the Northeast and West. Homeownership increased by at least a percentage point in the Midwest and South, but remained statistically unchanged in the Northeast and West.

The homeownership boom came at a time that posed financial challenges for many Americans. There have been heavy job losses in 2020 due to the pandemic, but above all they have young adults and the workers of low-wage occupations. These two groups are less likely to be potential buyers. The New York Federal Reserve has determined the median credit score of first-time mortgage borrowers in 2020 was around 740. A credit score of 700 or higher is generally considered good, and the median for 2020 was “higher” than ever since 2002.

At the same time, interest rates have been at record levels in 2020, which makes it easier for those looking for a home to take this step.

In addition, household income was at a record level before the onset of the pandemic. The median adjusted household income was around $ 80,700 in 2019, compared to $ 76,000 in 2018. And household income was at all-time highs for most age groups.

Finally, the net increase in the number of owners reflects a slowdown in foreclosures. Before the pandemic, the foreclosure rate was far below its 2010 peak. Although the recession has made it more difficult for some homeowners stay on top of their mortgage payments, the foreclosure moratoriums have so far prevented many homeowners from losing their homes.

Richard fry is a senior researcher specializing in economics and education at the Pew Research Center.

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