I recently had lunch with a senior finance executive who is in his mid 30s, married and has a young daughter. The conversation turned to home ownership and how it is viewed by people in his age group.
He rents and said that currently he and his wife (also a professional) have little desire to purchase a home. He went on to say that many people he knows that are in his age group feel the same way about home ownership.
This made me think about how fast and far the home ownership pendulum is going to swing back.
Since 2005 home ownership has steadily declined from 69% to 63.7% at the end of 2016.
As can be seen in the US Census Bureau graph below, the decline has been longer and steeper than in any other period going back to 1965.
A closer look will also show you that the drop off continued after the 2007-2009 recession.
As we all know trends don’t continue forever. But we do need to look into what has changed that can affect any rebound. For more data check out the entire report at https://www.census.gov/housing/hvs/files/currenthvspress.pdf
During my conversation with my finance exec friend, he mentioned 2 reasons he and his wife did not want to buy a house. The first was he didn’t view it as a good financial decision. Housing prices are still recovering from the 2007 – 2008 housing crash. Secondly, his career could require him to move regularly and he didn’t want deal with buying and selling his property every couple of years.
Industry research on this topic has identified 2 other reasons that millennials are not buying homes like people their age did a generation ago.
College loan debt plays a very large factor. Graduates are saddled with this debt for a long period of time which makes it difficult to save for a down payment. This coupled with a less than robust job market adds to the headwinds in home ownership, especially among people in their 20s and 30s.
If history is any indicator, the trend in home ownership should reverse itself. However the trough is deep and even returning to rates of the 1980s can take some time.
Bottom line, real estate agents should be prepared to deal with home renters for the foreseeable future.