Saturday, March 05, 2011

Steep Decline in Home Buying among Young

Young adults are buying homes at a sluggish pace. My analysis of the change in the homeownership rate of 25-to-29-year-olds as they age into the 30-to-34 age group shows that young adults are more hesitant to buy a home today than at any time in the past quarter century.

First, some background. The 30-to-34 age group is critical for home buying. This is when the homeownership rate surpasses 50 percent of households, a fact recorded each year by the Census Bureau's Housing Vacancy Survey for nearly three decades. In 2010, 36.8 percent of householders aged 25 to 29 owned a home, as did 51.6 percent of those aged 30-to-34.

Here's the catch. Those 30-to-34-year-olds in 2010 were 25-to-29-year-olds in 2005. So let's take a look at what happened to the cohort's homeownership rate over those five years. In 2005, the homeownership rate of 25-to-29-year-olds was 40.9 percent. In 2010, the homeownership rate of 30-to-34-year-olds was 51.6 percent. So far so good--a big increase in the cohort's homeownership rate! But this increase is far smaller than the one experienced by 25-to-29-year-olds as they aged into their early thirties between 1995 and 2000. In fact, it is only about half as big (10.7 percentage points versus 20.2 percentage points). The gain is also smaller than the one that occurred to 25-to-29-year-olds as they aged into their early thirties between 1985 and 1990 (14.1 percentage points).

Here's the bottom line: Over the past few years, householders aged 30 to 34 experienced a bigger decline in homeownership than any other age group, their rate falling from 56.8 to 51.6 percent between 2005 and 2010. Behind the decline is the fact that millions of young adults--as they enter this critical age group--are deciding they do not want (or cannot afford) to buy a home.


raf said...

I wonder how these home ownership trends compare to marriage statistics

Chad Johannesen said...

How is the lack of household formations and college graduates moving back in with their parents factored into this study?

Cheryl Russell said...

The decline in marriage and lower household headship rates (caused by doubling up) are both explanatory factors for the decline in homeownership among young adults.

Mike said...

This age group includes many college graduates who are unable to find suitable jobs and are opting to forgo home buying until they are more financially secure.

Haig said...

I agree with all that you say but there is another problem as well! The last 10 years a lot of the projects were geared up for more affluent individuals/couples. With the decline in word economies first time buyers cannot find affordable properties. So, what needs to be done is for developers to adjust their new projects to the current market needs. This is a tactic my Company in Cyprus has implemented the last 3 years and it has been very successful.