U.S. Homeownership Rate at a Fifty-Year Low, More Americans Look to Rent
During the second quarter of 2016, the U.S. homeownership rate has reportedly fallen to a new, five-decade low. Although history suggests the presence of a largely-weakened yet prolonged housing bust, new data about homeownership demographics suggests otherwise.
Historically, we have seen major losses incurred during the two notable deleveraging phases of the last century, namely the Great Depression and (arguably) the financial crisis of 2008. At the end of each long-term debt cycle (spanning roughly 60-75 years), we have seen massive amounts of debt accumulated, enough to quickly shift the great wealth booms generated by the U.S. population into drastically unexpected busts.
However, modern studies and indicators are offering a new cause to the low homeownership rates. Recent data suggest that a significant portion of the American population is shifting towards the option of renting properties as an alternative to buying. Two ways to interpret this information include analyzing younger household demographics and stepping back to observe the economy’s strength as a whole.
The first way to analyze this information is to study the demographics of the younger households, specifically those that contain the members of Generation X (those born between 1965 to 1984). As student loan debt is rapidly rising along with rents and home prices, it is becoming increasingly difficult for Generation X to purchase a home and maintain sufficient household inventories. This postulate can be corroborated by a significant decrease of homeownership for 18 to 35-year-olds by an astonishing 34.1%.
Stepping back to view the bigger picture, however, we can see a steady recovery from the financial crisis of 2008, as overall housing formation and recent non-farm payrolls exhibit strong results. The Wall Street Journal reports that renter-occupied housing units have surged by 967,000 from last year.
From these two aspects, it can be seen that not only are an increasing amount of people willing to venture into rental real estate (shown from rising households and general economic strength), but also a rapidly growing number of people (namely from Gen. X) are renting properties due to the financial rigidity they face as a result of student loan debt, family obligations, etc.