(Reuters) - The U.S. homeownership rate rose to its highest level in nearly 12 years in the second quarter as low mortgage rates boosted demand for housing, offsetting record unemployment triggered by the COVID-19 crisis.
The homeownership rate rose to 67.9% in the April-June quarter, up from 65.3% in the first quarter, a record increase, according to a report from the Commerce Department released on Tuesday. That was the highest level since the third quarter of 2008 and was up from 64.1% a year ago. Homeownership increased in all four regions last quarter.
The report was the latest indication that the housing market was weathering the coronavirus pandemic much better than the broader economy. Data this month showed a surge in homebuilder confidence in July, and an acceleration in home construction and sales of both new and previously owned homes in June.
The coronavirus crisis has led companies to allow employees to work from home. The emergence of home offices and schooling has fueled demand for bigger houses in larger spaces in small metro areas, rural markets and large metro suburbs.
The burden of unemployment from the pandemic has fallen disproportionately on low-wage workers who are more likely to be renters, explaining why the housing market is in better shape. The economy slipped into recession in February.
In terms of age groups, the biggest increase was in households under age 35. That suggests that many millennials who were gearing up to buy homes may have accelerated those plans because of the pandemic, said Taylor Marr, lead economist for Redfin. “The pandemic really caused everyone to re-evaluate their timeline.”
Lower interest rates change the math for some buyers by making mortgage payments equal to or less than what some are paying in rent, he said. Others with more flexibility to work remotely may have decided to move for more space, he said.
While ownership increased among Blacks, it continued to lag rates for whites and Hispanics.
The rental vacancy rate dropped to 5.7%, the lowest level since the second quarter of 1984, from 6.6% in the first quarter. In the second quarter, the median asking rent for vacant units was $1,033.
Reporting by Jonnelle Marte in New York and Lucia Mutikani in Washington; Editing by Andrea Ricci and Matthew Lewis