In another sign that the struggling U.S. economy is facing tough headwinds, the U.S. Census Bureau has just released a report showing that home ownership -- a key foundation of the “American Dream" -- has fallen to its lowest level since 1998.

Meanwhile analysts at Morgan Stanley, looking at the same data but also adding data on mortgages that are significantly delinquent and viewed as likely to end up in foreclosure, say that the rate of home ownership may actually be lower still, hitting a level not seen since 1965.

The Census report, which surveyed home vacancies during the second quarter of 2011, found that 65.9% of American households are living in houses that they own. That’s down from a 2004 high of 69.2%, down from 66.9% from a year earlier, and matches the level of 1998.

The median asking price of a home in the second quarter was found to be $138,000, with prices still trending lower.

The Morgan Stanley analysts, meanwhile, say that when likely defaults are added to the mix, the actual home ownership rate at present should be just 59.2%, which would put home ownership back where it was in 1965, the first year the Census Bureau began conducting annual housing surveys.

The Morgan Stanley analysts, in their report, conclude, “The combination of falling home prices, limited mortgage credit, continued liquidations, and better rental options is fundamentally changing the way Americans live.” They add, “We believe this change is only beginning and is moving the country towards becoming a rentership society.”

The Census Bureau survey finds that 10.8% of total housing units in the U.S. are currently vacant. Slightly more than half of these properties are being held off the market, either by banks or owners because of the current low sales price.

Home ownership rates are highest in the Midwest (70%), and lowest in the Western U.S. (60.3%), but declined in all regions on both a quarter-to-quarter, and year-to-year basis.

The Census report shows that home ownership rates are highest for people over 65 (80.8%), and lowest for those under 35 (37.5%), but ownership rates are down for all age groups except for retirees, whose rate of ownership hasn’t changed from the year earlier.

Among racial groups, homeownership among non-Hispanic whites was highest (73.7%), compared to 56% for non-whites, and 44.2% for black households. Ownership rates fell for all three groups over a year ago.