U.S. homeownership fell to a 20-year low in the fourth quarter, but a sharp rebound in the rate at which Americans are setting up homes is expected to help drive a pick-up in housing.
The seasonally adjusted home ownership rate slipped to 63.9 percent, the lowest level since the third quarter of 1994, the Commerce Department said on Thursday. The rate, which peaked at 69.4 percent in 2004, was 64.3 percent in the third quarter.
Household formation, however, more than quadrupled to 1.7 million in the fourth quarter from only 356,000 in the same period in 2013. While the gains were driven by renter households, that should provide a boost to home building.
Housing has lagged an acceleration in the broader economy. But with household formation picking up, thanks to a strengthening labor market, and the government taking steps to ease credit requirements for first-time buyers, housing is expected to regain momentum this year.
"The combination of a high share of young adults living in the parental home, falling mortgage rates and loosening credit means that the outlook for household formation is strengthening," said Paul Diggle, a property economist at Capital Economics in London.