Home ownership rates have been declining for the past ten years, a fact that is often attributed to Millennials failing to get on the property ladder. In fact, Generation X is largely to blame.
According to Harvard’s State of the Nation’s Housing report for this year, homeownership amongst those aged between 35 and 54 has declined far more than any other age group since 1993. This is particularly true for those aged under 44. Apparently this is because the market hit a peak when these buyers were at an age to purchase their first property. Older members of Generation X had just reached an age where they would normally have purchased a bigger home when the housing crisis began. As such they were hit by the decline in property prices which resulted in some homeowners facing foreclosure or having underwater mortgages.
At the moment the homeownership rate is currently 63.7% and is largely propped up by Baby Boomers. Generation X may not be able to support these homeownership rates as this group is much smaller. In comparison, Millennials are thought to have a much higher probability of building up their careers and being able to catch up in the property market, even though homeownership rates are currently low amongst this age group. However those aged between 35 and 44 are more likely to struggle.
Generation X affects those born between 1965 and 1984 and this age group forms an important part of the real estate market. Their ability to trade up homes frees up inventory for first-time buyers. Unfortunately this isn’t happening and the number of homeowners’ age between 35 and 39 has declined by 23% compared to a decade earlier.
People who form part of Generation X are choosing to rent homes for longer which means there is a shortage of rental property for younger would be renters. In addition, rental rates have been increasing due to higher demand which in turn is making it harder for those in rental property to save up for a down payment.
The problem is exacerbated even further by stagnant wages. The article in CNN Money points out that households aged between 35 and 44 have incomes that are at mid-1980s levels while the situation is even worse for those aged between 45 and 54 and whose incomes are at the lowest since the 1960s came to an end.
There are hopes that in the future there will be more Generation X homeowners. While 11 million people lost their homes due to foreclosure, just two million have been able to return to the market since that time. It’s expected these levels will begin steadily increasing.