Fewer Young People Are Buying Homes
I rent a charming apartment in a seaside town in Massachusetts for a reasonable price. "Charming," of course, is long-cherished real estate code for "small," and "reasonable," in this market, is not a modest sum. If I bought, I could probably get more space for my money (not to mention equity), but I lack the sterling credit and sizeable down payment that are essential to getting a mortgage these days.
And so I find myself the apartment-dwelling epitome of an inauspicious trend: the marked decline in homeownership among young adults.
Nationally, the number of homes occupied by owners edged up about 1 percent between 2005 and 2010, according to numbers from the U.S. Census Bureau's American Community Survey. The number of units occupied by owners under 35, however, dropped 16 percent over the same period. In California the number fell 25 percent, in Florida 28 percent.
The obvious question, of course, is why young people are opting out of the real estate market at rates so much higher than everyone else. The answer involves both economics and emotion.
First of all, young people have less money and less stable employment. In 2011, the average unemployment rate for those between 20 and 24 was 14.6 percent, according to the Bureau of Labor Statistics, as compared to just 7.3 percent for those between 35 and 44. The national average for the year was 8.9 percent.
"The economic situation has been very difficult on new entrants to the workforce," said Michael Goodman, chairman of the Department of Public Policy at the University of Massachusetts at Dartmouth.
This situation means that, despite record-low interest rates and falling home prices, "there aren’t a whole lot of young people who are in a financial position to take advantage," Goodman said.
Shifting Attitudes to Blame
Young adults' attitudes toward buying may also have shifted. When prices were rising, many felt certain they could sell at a profit anytime. Now, the real estate bubble has burst, and a quick and profitable sale is by no means guaranteed.
Add to that the fact that young people, as a whole, are less likely to have married, started a family, or settled into a long-term job.
"Combine those general tendencies with current economic conditions, and you have a recipe for a very small percentage inclined to and able to lay down roots," Goodman said.
Living with Mom & Dad
Furthermore, more young people are choosing to remain or return to their parents' homes, rather than renting or buying. A recent survey by the Pew Research Center found that 29 percent of adults aged 25 to 34 had moved back in with their parents in recent years. And fewer people establishing their own households means fewer young people buying homes, Goodman said.
With buyers under 35 making up a full third of the market last year, according to the National Association of Realtors, continued decline in this sector could hamper economic recovery, Goodman said.
"It has real implications for the market – not just for young pp but everyone who’s participating in the market," he said.
So in the meantime, I'll just keep browsing real estate listings and dreaming.