Homeownership in the U.S. has fallen back to levels seen four decades ago

This year is not limited to high prices for everything from groceries to gas, because of the high prices for everything from groceries to gas.

After almost a decade of gains, homeownership in the U.S. has slipped back to levels seen four decades ago, see chart below, when former Federal Reserve Chairman Paul Volcker was waging a battle against inflation that pushed the American economy into a recession.

Fed Chairman Jerome Powell repeatedly said he wants to avoid a recession, while fighting inflation near a 40 year high, but he also recently said he can't make any promises.

Mizuho analysts pegged the decline in homeownership to 65.4% in the first quarter of 2022, a drop from a recent peak of nearly 68%, as part of their monthly report on economic data released Tuesday. In 2016, they pegged the all-time low at 62.9%, a level that matched the lows of the mid 1960s.

After the Fed started to raise its policy rate, and after many families raced to buy homes in the suburbs in the early months of the epidemic to accommodate remote work, the slide in homeownership comes as a white-hot housing market has started to cool.

The drop in homeownership, a cornerstone to building generational wealth, speaks to the affordability crisis in America, in part due to the historically low levels of vacant homes about 1.1 million units on the market, according to Mizuho data.

According to Freddie Mac FMCC, the average for a 30 year fixed-rate mortgage increased above 5% in May for the first time in almost a decade, but it remains well below the 16% to 17% peak rates of the early 1980s.

The mortgage delinquency rate fell to a new low of 2.75% in May, a new low from the long-term average of 4.31% for the same month, according to Black Knight data released Tuesday.

The rise of institutional landlords in single-family rentals since the foreclosure crisis a decade ago has been a topic of recent discussions on Capitol Hill.

Institutional investors have bought hundreds of thousands of homes, many in Black communities. In recent years, Wall Street has been providing institutional landlords with low-cost non-recourse funding to buy up homes as rentals, according to critics. The rise of the roughly $8.4 trillion mortgage-backed securities market has become a key avenue of housing finance for families in the past 40 years.

Wall Street watching closely as the Fed manages its plans to reduce its footprint in a jittery market, as the large holding of these mortgage bonds has made the Fed a major force in the sector.

Stocks SPX, mostly eked out gains Tuesday, will be monitored by investors as the minutes from the Fed's last rate-setting committee meeting are released on Friday. The benchmark 10 year Treasury yield, TMUBMUSD 10 Y, used to price everything from consumer to corporate debt, fell to 2.808%, down from a multiyear high of 3.482% in June.