On the Downward Slope
Homeownership has hit a 20-year low, falling for the eighth straight year, and there are no signs of it turning around.
And it’s not just the slow-to-start millennial generation deflating those rates, according to Harvard University’s Joint Center for Housing Studies’ State of the Nation’s Housing 2016 report. The falloff is evident across all age groups, particularly Gen X, which bore the brunt of the housing bust and has yet to recover. When the market crashed, younger Gen Xers were in their prime first-time homebuying years and older members were at the stage where households tend to trade up or make significant (often equity-funded) improvements to their homes, according to the study. The downturn left them with little equity to weather the storm, and as a result, homeownership rates among Gen X have fallen the most, and stand at 4 to 5 percent below rates among same-aged households 20 years ago.
Buyers also face a myriad of problems that continue to erode the homeownership rate. Millennial renters are more cost-burdened, meaning they spend more than 30 percent of their income on rent, than generations before them. Renters with student loan debt are also increasing, jumping from 30 percent in 2004 to 41 percent in 2013, according to the study.
Diminished or stagnant household income across the board is another key factor, coupled with restricted access to financing. Lenders are reluctant to lend to borrowers with less-than-stellar credit. Social and economic policy think tank The Urban Institute estimates that from 2001 to 2013 there was a 37 percent drop in home purchase loans among borrowers with scores between 660 and 720, compared with a 9 percent drop among borrowers with higher scores.
