WASHINGTON – Don’t blame the millennial generation for lacklustre home sales.
They are increasingly ethnically diverse, more educated and less likely to be married — all factors that make them less likely to own a home, said a new report released Wednesday by Trulia, the online real estate firm. After adjusting for these population changes, younger Americans are actually buying homes at the same rate as they did during the late-1990s.
“For at least the past 20 years, there have been significant demographic headwinds for homeownership for young people,” said Jed Kolko, chief economist at Trulia.
The analysis suggests that the recession — for all its damage to the economy — did little to turn off millennials from the idea of owning a home compared to previous generations. In fact, the report shows that the major group whose ownership rates suffered because of the downturn is middle-aged Americans.
The easy credit offered during the housing bubble caused more young people to buy than they otherwise would and masked the impact of the demographic changes, according to Trulia. The bursting of that bubble and the resulting recession that began in 2007 then caused ownership to fall where it should be given the demographic shifts. Because a greater percentage of younger Americans are attending college and graduate school, they are settling down a few years later — which causes them to delay buying a home.
Census figures show that the share of 18-34 year-olds who are married is 30 per cent, down from 47 per cent in 1983. Just 29 per cent of them live with children, compared to 39 per cent three decades ago. Since more people in the age range are single and childless, Trulia looked at the number of homeowners who are also identified as the head of their households. After adjusting for these population shifts, the share of people under 35-years old who own homes is the same as it was for 1997.
Standard Census data, which aren’t adjusted for these factors, show that the ownership rate among those younger than 35 has declined to 36.2 per cent from 38.6 per cent in 1997. Slightly less than 65 per cent of the country owns a home, down from a peak of 69 per cent in the middle of 2006.
While the weak economic rebound has affected home buying, Trulia’s analysis puts more of an emphasis on demographics than much of the real estate industry has to explain poor sales.
Lawrence Yun, chief economist at the National Association of Realtors, blames the lack of buying among younger people on the sluggish recovery, now entering its sixth year.
“It’s principally the economic factors: jobs and student debt,” said Yun, noting the difficulty of saving for a down payment when earning modest wages and repaying college loans.
The number of first-time homebuyers in May was near record lows at 27 per cent, versus a historic average of 40 per cent, the Realtors said last month. Yun says that as the economy continues to bounce back, so, too, will sales to first-time buyers.
By contrast, Trulia found that homeownership really lags among a different age bracket: the middle-aged. After adjusting for demographic changes, it found that their ownership rate was the lowest since 1976, a clear casualty of the housing bust.
That’s because many Americans who are now middle-aged bought during the bubble at inflated prices with loans that they could not repay.
“It’s the 35-54 year-olds who have fallen further behind,” Kolko said.