Why the Decline in Homeownership?

What accounts for the decline in the homeownership rate between 2004 and 2005? One possible explanation is the economic malaise of the past few years, with incomes stagnating and poverty increasing. Another explanation could be divorce, with homeowning couples splitting into two households—one owner and one renter. Or perhaps homeowners in some markets are cashing out.

A look at the regional statistics suggests economic stagnation is the biggest factor behind the decline. The overall homeownership rate rose in the Northeast (from 65.0 to 65.2 percent) and West (from 64.2 to 64.4 percent) between 2004 and 2005—where some of the hottest housing markets are located. The rate fell a tiny bit in the South (from 70.9 to 70.8 percent). In the Midwest, however, which has been hard hit by layoffs in the manufacturing sector, the decline in homeownership was relatively steep—falling from 73.8 to 73.1 percent between 2004 and 2005.