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DOES Q3 UPTICK IN HOMEOWNERSHIP REVEAL GOOD NEWS OR FALSE HOPE? Some analysts see signs mortgage buyers are finally contributing to recovery; others see threat in hidden vacancies. The Census Bureau's announcement last month that the national homeownership rate ticked up slightly in the third quarter of this year has some analysts wondering if this is a turning point for the market and others labeling slow household formation as a persistent hindrance to full market recovery. "Today's data could be interpreted as an early sign that mortgage buyers are finally beginning to make more of a contribution to the housing recovery, and the eight-and-a-half-year decline in homeownership rates may finally be coming to an end," Capital Economics said in a statement following the release of the Census Bureau numbers. On the other hand, Trulia chief economist Jed Kolko responded to the Census data, "Household formation was alarmingly slow and vacancies remain stubbornly high." The national homeownership rate stood at 65.3 percent at the end of the third quarter, up 0.3 percentage points from the previous quarter but down 0.2 percentage points from last year, according to the Census Bureau. The homeownership rate is highest in the Midwest, where the third-quarter rate is 69.6 percent, and lowest in the West, where it is 59.5 percent. Homeownership in the Northeast and South is 63.6 percent and 66.9 percent, respectively. All four regions demonstrated increases over the third quarter. However, a look at seasonally adjusted data reveals a stagnant homeownership rate of 65.1 percent nationally in the third quarter, unchanged from the second quarter and down 0.1 percentage point from the first quarter of the year. Household formation year-to-date in the third quarter was 380,000, still well below historical norms of 1.1 million. "What's behind sluggish household formation?" Kolko asked. His answer to the question is that fewer young adults are getting places of their own. "The share of millennials living with their parents rose from 31.4 percent in 2012 Q 3 to 31.6 percent in 2013 Q 3, based on the raw Census data," Kolko explained. He went on to say, "Most 32 worrying is that there's been no increase over the past year in young adults moving out of their parents' homes or getting jobs. The slow household formation number is one of the most alarming housing indicators to come out this year." Capital Economics also pointed out that the rise in homeownership in the third quarter was driven primarily by older buyers, while "ownership rates among under-35s was more or less unchanged." Furthermore, the "recent drop in home sales and mortgage demand, as well as the fact that the rise was driven by older households, suggests that it is too soon to declare a turning point," Capital Economics said. Looking ahead, Capital Economics said the recent slowdown in housing market activity might suggest another drop in homeownership to come, but "even if ownership rates do fall back next quarter, the scope for them to fall further seems increasingly limited." The national vacancy rate in the third quarter decreased 0.3 percent annually to 8.3 percent for rental housing and held steady at 1.9 percent for homeowner housing, according to the Census Bureau. "An unusually high share of vacant homes is being held off the market," according to Trulia. About 53 percent of vacant homes are not listed for sale, based on Census data. That's "the highest share since before the bubble," Trulia said. The company warns that high vacancies represent a dark cloud looming behind bright headlines touting improving housing conditions. Furthermore, the high vacancy rate is widespread. Trulia says vacancies exceed prebubble levels in 86 of the largest 100 metros in the country. Some homes are being held off the market temporarily for repairs before being listed for sale or rent. However, Trulia warns that when these homes hit the market, demand may not rise to match the new inventory due to slow household formation. Not surprisingly, vacancies are lowest in areas that suffered the least from the housing crisis.