The Mystery of the Young Homeowner

Twenty-two percent of young adults (under age 25) were homeowners as of the third quarter of 2010, a percentage far higher than the norm for the past quarter century. What is keeping the homeownership rate of young adults afloat in the midst of the housing collapse?

For most of the 1980s and 1990s, the homeownership rate of young adults was well below 20 percent, bottoming out at 14.8 percent in 1993. Then the rate began to climb, peaking at 25.7 percent in 2005. It is easy to figure out why the rate ballooned--parents were using their own inflated home equity to help their children buy homes in the expectation that their children could cash in on rising housing prices.

Since 2005, the homeownership rate of householders under age 25 has fallen, but not as much as you would expect. Think about it. Most homeowners under age 25 in 2010 had to have bought their home since 2005. With home equity greatly diminished, credit tight, unemployment sky high, and many young adults moving back home with their parents, what continues to elevate the homeownership rate of young adults?