Freddie's Economic Revisions Optimistic For Housing
February 20, 2015
Home Ownership Among Young Up, Middle Aged Down
June 9, 2014
Home Ownership Among Young Is Up, While Home Ownership Among Middle Aged Is Down
A careful analysis of homeownership numbers has produced some reveling points according to a report by Jed Kolko, Chief Economist for Trulia. Here are some of their findings:
• Though the published homeownership rate for young adults is still falling, true homeownership among young adults started rising in 2013. Adjusted for longer-term demographic shifts, young-adult homeownership is now at pre-bubble levels, but middle-aged homeownership is lagging.
• While the housing market is clearly improving, it looks like the recovery is happening even without much improvement in first-time homeownership. Does that mean the housing recovery isn’t for real?
• Homeownership among young adults is both on the rise and not too far off from where demographics say it should be.
• Homeownership among young adults increased between 2012 and 2013 after hitting bottom in 2012. However, once we adjust for the huge demographic shifts among young adults – far fewer young adults are married or have kids than two or three decades ago – homeownership in 2013 was roughly at late-1990s levels.
• That means that the demographic shifts among young adults account for the entire decline in homeownership for 18-34 year-olds over the last twenty years. In other words, if the pre-bubble years of the late 1990s can be considered relatively normal, than today’s lower homeownership rate for young adults might be the new normal, thanks to demographic changes.
• There may be longer-term damage to homeownership from the recession – but to the middle-aged, not millennials. Homeownership among 35-54 year-olds is lower today than before the housing bubble, even after accounting for demographic shifts.
• The true homeownership rate for young adults fell from 17.2% in 2005 to 13.5% in 2012 – a drop of 22%.
• But our true homeownership rate, which takes household formation into account, turned up slightly in 2013. It’s still the second-lowest year historically, but the tide has turned.
The demographics of 18-34 year-olds have changed dramatically over the past 30 years, between 1983 and 2013, such as:
- The percent married fell from 47% to 30% - The percent living with their own children fell from 39% to 29% - The percent non-Hispanic white fell from 78% to 57%
Each of these demographic shifts is a headwind for homeownership. Young people who are married, have children, or are non-Hispanic white are more likely to own a home than among young people who aren’t.
It’s the middle-aged, not millennials, whose homeownership rate today looks lower than before the bubble. Using the same demographic-baseline analysis, the 2013 homeownership rate for 35-54 year-olds is below the “demographic baseline” (which barely budged over the past 20 years for this age group). Furthermore, homeownership for the middle-aged has not yet begun to turn around as of 2013, unlike for millennials.
And that’s the point: the rise and fall of homeownership during the housing bubble and bust is about people who are middle-aged today. The millennial generation was still in their early 20s or younger in the mid-2000s – too young to have bought during the bubble and then to have suffered a foreclosure.
Turning more millennials into homeowners, therefore, may not be the missing piece of the housing recovery after all. Long-term demographic changes mean that homeownership among young adults is roughly where it should be. The real missing homeowners are the middle-aged.