Homeownership Declines in Younger Households

 

New data on homeownership from the Census Bureau suggest that tight credit conditions for home buying are having a disproportionately negative impact on those under age 35.
Courtesy of NAHB

Recently published data from the Census Bureau indicate that the homeownership rate declines that have occurred during and after the Great Recession are taking an increasing toll on the under-age-35 cohort. The homeownership rate for this age group declined from 39.2 percent to 37.9 percent from the last quarter of 2010 to the first quarter of 2011 alone.

Having to deal with recent credit hurdles is holding back housing demand among younger homebuyers who would add new net households and help absorb excess supply. We have previously discussed delayed household formation, and how it constitutes a growing shadow demand for housing.

Finally, the effects of tight credit conditions for homebuying are creating distinct generational impacts. Since their peaks in 2004 (35 to 44 peaked in 2005), homeownership rates have declined: 5.2 percentage points for the under 35 cohort and 4.9 points for those 35 to 44.

These data make it clear that younger buyers, who have less access to wealth to finance a downpayment, are being edged out of the market at greater rates. Indeed, National Association of Realtors most recent estimates indicate that the share of first-time homebuyers in the existing home market is only 33 percent (down from a historical average of about 38 percent to 39 percent), while the share due to all-cash buyers is up to 35 percent. 

Increased downpayment requirements and, perhaps, limits to the mortgage interest deduction would exacerbate these impacts.

– Courtesy of NAHB