The U.S. homeownership rate in the second quarter fell to its lowest point since 1995, and many experts say they expect it to drop even lower in the coming years as forward-looking mortgage interest rates rise and continue to impact home sale volume, a Zillow survey shows.
The seasonally adjusted homeownership rate fell to 64.7% in the second quarter, according to the Census Bureau, slightly lower than the first quarter’s rate of 64.8%.
This continued downward trajectory is attributed both to rising mortgage rates that impact mobility and home affordability, and to Millennials, who are increasingly delaying home purchases, experts suggest in the most recent Zillow Home Price Expectations Survey.
About 62% of survey panelists expected rising mortgage interest rates to have a “somewhat negative” or “significantly negative” impact on the number of home sales going forward.
On average, they expected interest rates on a 30-year, fixed-rate mortgage to reach 5.28% by July 2016. In comparison, the rate as of June 2014 averaged 4.16% for a 30-year, fixed-rate mortgage.
Survey panelists expected U.S. median home values to end 2014 up 4.6% to $177,895, on average, and to exceed their 2007 peak levels by the end of 2017, roughly a decade after the housing bust and ensuing recession began, Zillow says.
Home values are expected to show an annual increase, on average, between 3.7% and 5.6%, the survey’s experts predict.
“Although one would expect to observe trends like this in a calming housing market, it’s way too soon to conclude that the market has healed and returned to the old normal,” said Terry Loebs, founder of Pulsenomics LLC, an independent research firm that conducts the survey quarterly.
Written by Emily Study