What The Rise In Homeownership Means For Real Estate

Performance Property Real Estate Question

Q: Gerald, I just read that the homeownership rate in the US finally went up again after years of decline. What does this mean for real estate prices? Candy, Berkeley Heights, NJ

A: Yes, homeownership recently went up from 63% to about 65%. 65% is not near the 69% homeownership rate we saw at the height of the real estate bubble, but it’s a welcome, healthy sign. Homeownership rates and rental rates are inversely related. When homeownership rates fall (as they did after the real estate bubble burst), rental rates rise and when homeownership rates rise, rental rates decline. So this increase in the homeownership rate will reduce the percentage of people who rent which, depending on which local market you’re in, will likely slow down the rate of increase in rent prices that have been skyrocketing since the global financial crisis.

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