Home Ownership Among Young Up, Middle Aged Down

Home Ownership Among Young Is Up, While Home Ownership Among Middle Aged Is Down

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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.

Reference Economic Focus

#firsthome #homeloans #homesales #ushousingmarket #realestate #buyinghomes

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