The drop in homeownership is largely due to a delay in homebuying by the millennials, who have the lowest ownership rate of their age group in history. Millennials are not only burdened by student loan debt, but they have also delayed life choices like marriage and parenthood, which are the primary drivers of homeownership.
Why have today’s young people, as compared to young people in the recent past, delayed buying property, marrying and having children?
“While the millennial homeownership rate continues to decline, it’s important to note that the decrease could be just as likely due to new renter household formation as it is their ability to buy homes,” wrote Ralph McLaughlin, chief economist at Trulia. “Certainly low inventory and affordability isn’t helping their efforts to own, but moving out of their parents’ basement and into a rental unit is also a good sign for the housing market.”
Why are many of today’s young families choosing to rent rather than buy their homes?
The rental market is strong across the nation, which has meant a sharp rise in rents; that, in turn, keeps many young renters from being able to save for a downpayment on a home…
More of the same. However:
…It is also more difficult to qualify for a mortgage today than it was during the last housing boom. Home prices have been rising at a far-faster clip than wage growth or employment growth. In addition, the supply of entry-level homes for sale continues to drop. Add it all up, and young buyers are continuing to rent longer.
Ah, the beginning of an acknowledgement of what’s really going on.
“Broadly speaking, the falling homeownership rate is a sign that renting isn’t only for those just starting out or making a transition, but is becoming an increasingly viable longer-term option for many households,” noted Svenja Gudell, chief economist at Zillow. “It also means incomes are not yet rising quickly enough to broadly support new homeownership, and that inventory remains too tight to allow for meaningful access to affordable housing.”
Yes. Housing costs, especially the upfront costs of home buying, have outstripped income growth. Developers have focused on higher-end properties. Many prospective first-time and lower-income buyers, typically young people, cannot afford to buy. Non-buyers have bid up rents.
-Economic recovery continues more slowly than it should, due to high levels of taxation and govt regulation (another form of taxation).
-ZIRP has contributed to a runup in residential property prices.
-Young people’s incomes have not kept up with housing prices. This is due in part to long-term structural changes in the economy, and of course there are winners as well as losers, but it’s also a function of increased govt involvement in the economy that has suppressed some of the animal spirits that might otherwise create more and higher-paying jobs and business opportunities for young people.
-Mortgages are harder to get for marginal borrowers including many first-time home buyers, as banks face increased regulation, reduced competition (a consequence of increased regulation — who knew?) and the option to make easy money by investing customer deposits in low-risk govt bonds as opposed to lending them out.
-Overall the rich get richer, not because of any insidious effects of free enterprise, but because the modern, overregulated, increasingly cartelized and corrupt US economy reduces opportunities for people who lack capital and connections.
Or maybe those darn Millennials and their preference for renting have reduced the rate of home ownership.
* In case it’s not obvious, the post title is an allusion to this often-cited NYT article that confused causes and effects.