By Lucia Mutikani

WASHINGTON (Reuters) - Homeownership in the United States hit a 19-year low in the second quarter as tight finances continued to drive Americans toward renting, one of the lasting legacies of the recession.

The seasonally adjusted homeownership rate fell to 64.8 percent, the lowest level since the second quarter of 1995, the Commerce Department said on Tuesday.

That compared to 65.0 percent in the first three months of 2014 and 65.1 percent a year ago.

Economists said homeownership, which peaked at 69.4 percent in 2004, could fall even further as banks maintain stringent lending practices and wage growth remains tepid, despite an acceleration in job creation.

"We are becoming more of a rental society. It's becoming harder to own a home," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. "People who lost their homes to foreclosure are now renting and credit standards have tightened significantly."

The 2007-2009 recession, sparked by the collapse of the U.S. housing market, has left the economy with deep scars that will take long to heal. Wage growth remains lackluster, even though the unemployment rate is at six-year lows and the economy has recouped all the jobs lost during the downturn.

Weak wage gains have combined with higher mortgage rates and home prices to force many to give up on the American dream of home ownership, leading to a tightening of the rental market.

In the second quarter, the residential rental vacancy rate dropped to 7.5 percent, the lowest level in more than 19 years.

"That is not surprising, young adults are choosing to rent," said Yelena Shulyatyeva, an economist at BNP Paribas in New York. "The shock from the financial crisis is still here."

The shift toward renting could further boost the construction of multi-family units and undermine the single-family segment, the biggest sector of the housing market.

Multi-family starts have seen double digit growth over the last few years as developers scrambled to meet demand for rental units, while groundbreaking for single-family homes generally has been weak. This trend suggests the housing market recovery will remain sluggish for a while.

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In the second quarter, the number of occupied housing units - a gauge of household formation - increased 458,000 from a year ago. Economists said the increase was far below what would be needed to signal a strong housing recovery.

"Historically that number has been over a million, it has to be over a million in order for the housing market to start growing significantly," said IHS Global Insight's Newport.

"We are not seeing much growth in household formation, which means that young people graduating from college are moving in with their parents. That trend has not changed much and is the key reason why the housing recovery has been so weak."

(Reporting by Lucia Mutikani; Editing by Tom Brown)