Thursday, August 24, 2006

Who Will Get Hurt by Housing?

Yesterday the National Association of Realtors announced a decline in sales of previously owned homes for the month of July, and today the Census Bureau reports that new home sales also fell last month. Although the declines were expected by analysts, both exceeded predictions, heightening fears of trouble ahead for homeowners and the economy.

Who will be hurt by a downturn in the housing market? One vulnerable group is young adults. The homeownership rate of householders under age 25 has grown faster than that of any other age group over the past five years. In 2005, 26 percent of householders under age 25 owned their home, up from 22 percent in 2000. The homeownership rate of householders aged 25 to 29 ranked second in growth during those years, rising from 38 to 41 percent. Of the 3.3 million new homeowners in the U.S., more than one in five are under age 30.

In years past, these young adults would have been renting apartments and could have benefited from the transition to a buyer's market. But with housing prices rising fast and lenders marketing tempting interest-only loans, many took the plunge. Now they may have a hard time staying afloat.

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