The U.S. homeownership rate surged to 67.9 percent in the second quarter, up from 65.3 percent the previous quarter and marking the highest point the homeownership rate has reached since the third quarter of 2008, according to data released by the U.S. Census Bureau on Tuesday.
However, the stunning results of the report — known as the Current Population Survey/Housing Vacancy Survey (CPS/HVS) — left many economists scratching their heads wondering if the data was truly accurate with such a significant jump in the midst of a pandemic, despite record-low mortgage rates.
“It’s hard to believe the homeownership rate jump,” Mark Fleming, an economist at title insurance company First American, posted on Twitter Tuesday afternoon. “The underlying growth in owned households and decline in renter is….ummmm unprecedented?”
Fleming wasn’t the only one to notice either — Nicole Friedman, a U.S. housing reporter for the Wall Street Journal, also posted on Twitter, “What’s up with that huge jump in the homeownership rate?”
The Census Bureau did note that, due to the pandemic, it altered its methodology for this report from previous reports to be conducted via telephone calls instead of in-person interviews. Therefore, the change in methodology may have impacted the rates of reporting, the Census Bureau explained in a statement.
“The coronavirus pandemic affected data collection operations for the CPS/HVS during the first and second quarters of 2020,” the statement reads. “Data users should understand and consider these changes in data collection operations when interpreting the CPS/HVS estimates for the first and second quarters of 2020.”
The desire for extra space during quarantine combined with attractive interest rates may have spurred more millennials into seeking out homeownership more quickly, adding to the jump in homeownership rates and quickening an already developing trend, according to First American.
“While we’re taking the magnitude of the increase in homeownership with a grain of salt due to changes in data collection in the second quarter, the increase was driven by younger households, which is a trend that existed even prior to the start of the pandemic,” Odeta Kushi, deputy chief economist at First American, said in a statement emailed to Inman. “There is a longer run demographic demand shift away from renting to homeowning that is being driven by millennials aging into homeownership, and accelerated by historically low mortgage rates.”
Across minorities, homeownership rates increased as well, with the homeownership rate for Black Americans jumping to 47 percent from 44 percent the previous quarter. For Hispanics, the homeownership rate rose to 51.4 percent from 48.9 percent the quarter before.
Although historically low mortgage rates that have dropped below 3 percent have no doubt made homeownership more attractive to a much wider pool of Americans, the significant jump in the homeownership rate should be taken with a grain of salt.
In response to Fleming on Twitter (who straight up called the spike “unbelievable”), Joe Vavra, a professor of economics at the University of Chicago, noted that there was not a coinciding spike in mortgage purchase applications. “So I guess there was just a gigantic influx in young buyers paying all cash. You know, like young buyers usually do,” Vavra joked.
Lawrence Yun, the National Association of Realtors chief economist, credits the increase partly to the Census Bureau’s change in methodology. “Usually homeownership data moves at more of a glacier-slow pace, so to see a sudden move like this was quite surprising,” Yun told HousingWire. “Some of this increase could be due to the change in data measurement.”