Renters' shares of households declining.

Renters' shares of households have declined by nearly 4 percent since 1991, falling to approximately 32.1 percent from 36 percent. The change helped hold the growth in rental households to about 890,000 during 1990-02 vs. a 13.6 million rise in homeowner households. Two major factors that contributed to the decline are the aging of the Baby Boomers and low interest rates for mortgage loans.

Renters' shares of total households figured to decline at the start of the 1990s independent of economic conditions. A majority of the Baby Boomers turned ages 40 and 50 and homeownership rates rise with age. Approximately three-fourths of householders in their mid-40s are homeowners and the ratio reaches four-fifths for those in their mid-50s. The peak in the homeownership rate is not reached until the 65 to 69 age cohort.

Households in the 35 to 54 age cohorts rose by more than 1 million per year during the 1990s. They represented nearly half (45 percent) of all households. Nearly 700,000 of them were age 45 to 54. This emphasizes the affect of the Baby Boomers on the housing market and the economy.

Other demographic factors that affected the renter share of households were that fewer babies were born in the Baby Bust generation (1965 to 1977), which weakened demographic demand for rental units starting in the late 1980s. Young householders are overwhelmingly renters. Last year, 77 percent of householders under age 25 were renters. Householders under 25 years of age dropped from a peak of 6.7 million in 1979 to a low of 5 million in 1991. The Echo Boomers (children of Baby Boomers) began to enter the housing market in the middle of this decade, but it will take several more years before a marked upward trend occurs. Renters' share of total households will then increase.

About 77 percent of the youngest householders were renters last year, down more than 8 percent from 1992. A tight labor market with rising inflation-adjusted incomes increased housing affordability. And, equally important was that mortgage interest rates moved down for most of the past five years to what are now hovering around more-than-40-year lows.

Seniors now experience better health, are wealthier than their predecessors and therefore are better able to stay homeowners. Somewhat surprising is that about four-fifths of householders 75 years of age and older are homeowners.

Continued aging of the Baby Boomers into higher homeownership age cohorts will act as a limiting factor in increasing the renters' share of households through at least the remainder of this decade. It is nearly certain that mortgage interest rates will rise from their current levels and act as a brake to slow the rise in the home ownership rate.

Households by Age Cohort
Households in millions

                     1980   1985   1990   1995    2000
Total                80.8   86.8   93.3   99.0   107.4

Age of householder
15 to 24 years old    6.6    5.4    5.1    5.4     5.5
25 to 34 years old   18.6   20.0   20.4   19.5    18.3
35 to 44 years old   14.0   17.5   20.6   22.9    24.0
45 to 54 years old   12.7   12.6   14.5   17.6    21.3
55 to 64 years old   12.5   12.5   12.5   12.2    14.2
65 to 74 years old   10.1   10.9   11.7   11.8    11.5
75 or more            6.4    7.3    9.6   10.4    10.6

                          Change
                        1990-2000
                     Total   An. Ave.
Total                 11.4     1.14

Age of householder
15 to 24 years old     0.4     0.04
25 to 34 years old    -2.1    -0.21
35 to 44 years old     3.4     0.34
45 to 54 years old     6.8     0.68
55 to 64 years old     1.7     0.17
65 to 74 years old    -0.2    -0.02
75 or more             1.0     0.10

Renter Shares of Households
by Age Cohort

                       1992   1997   1998   1999   2000   2001   2002

United States, total   35.9   34.3   33.7   33.2   32.6   32.2   32.1
  Less than 25 years   85.1   82.3   81.8   80.1   78.3   77.0   77.0
  25 to 29 years       66.4   65.0   63.8   63.5   61.9   61.1   61.0
  30 to 34 years       49.5   47.4   46.4   46.2   45.4   45.2   45.0
  35 to 39 years       38.6   37.4   36.3   35.6   35.0   34.5   34.8
  40 to 44 years       30.9   30.3   30.0   30.1   29.4   29.2   28.3
  45 to 49 years       25.8   25.8   26.1   25.5   25.3   24.6   25.1
  50 to 54 years       23.8   22.3   22.2   22.2   21.5   21.8   22.2
  55 to 59 years       20.7   20.5   20.2   19.3   19.6   19.0   19.2
  60 ro 64 years       18.8   19.5   17.9   18.7   19.7   18.2   18.5
  65 to 69 years       19.2   18.1   18.1   17.1   17.0   17.6   17.2
  70 to 74 years       21.0   18.0   17.8   17.4   17.4   17.5   17.5
  75 years and over    26.7   24.2   23.8   22.3   22.3   21.9   21.6

                          Change
                       1992-   1997-
                        2002    2002

United States, total    -3.8    -2.2
  Less than 25 years    -8.1    -5.3
  25 to 29 years        -5.4    -4.0
  30 to 34 years        -4.5    -2.4
  35 to 39 years        -3.8    -2.6
  40 to 44 years        -2.6    -2.0
  45 to 49 years        -0.7    -0.7
  50 to 54 years        -1.6    -0.1
  55 to 59 years        -1.5    -1.3
  60 ro 64 years        -0.3    -1.0
  65 to 69 years        -2.0    -0.9
  70 to 74 years        -3.5    -0.5
  75 years and over     -5.1    -2.6

Source: U.S. Department of Commerce

Robert J. Sheehan is NAA's Consulting Economist.