The U.S. homeownership rate fell to the lowest level in 15 years in the first quarter of 2012, as borrowers lost homes to foreclosure and tighter inventory and credit kept buyers off the market. (Gittelsohn, 2012). The Census Bureau reported a rate dropped to 65.4 percent from 66 percent in the fourth quarter of 2011. According to the Census Bureau in June 2004 there was a record of 69.2 rates for homeownership. In 1960 the average age of a first-time homeowner was 24-25, according to David Berson in the journal Business Economics (Edwards, 2011).
Now, the ages at which people purchase homes are higher. The average age for homeowners was 34, according to the most recent American Housing Survey data collected in 2009 (Edwards, 2011). There has been a trend toward renting among the younger generation. A study by the John Burns Real Estate Consulting firm predicts the homeownership rate for people between 25 to 34-years-olds will continue decreasing though 2015 (Walsh, 2012). According to this study the number of first-time home buyers has dropped 20 percent since 2009.
There is a variety of reasons why young people are not buying homes anymore. People aged 25 to 34 is averaging 8.2 percent unemployment rate (Walsh, 2012). This generation is also getting higher-than-ever student loan debt and low wages. Many young people, who have a decent job, are trying to pay down debt instead of getting more. Federal student loans have bloated 360 percent since the beginning of the recession, with the average student debt held by someone who graduate in 2010 at $25, 250 (Walsh, 2012).
Homes prices are still relative high to pay. The interest for mortgages are as low as 3.87 percent (reported in February 2012), the lowest levels in the last four decades, but due to the countless loans default in 2000s it made the banks stricter and increased the requirements for mortgages when compared to previous years. (Edwards, 2011) Also, young people don’t see buying a home as investment anymore, they are afraid that their home won’t be worth what they paid for in the future.
A lot of people used to use terms such as “starter home”, to buy their first home, own it for a few years, resell it and make a profit out of it, then to move into their “dream home”. Due to the economy crash and the employment rate so high on younger ages, younger people no longer see purchasing a home as a good investment. They are afraid that they might lose their job and have to relocate or not be able to afford their home anymore. As time keeps moving on, young people are more afraid in buying, they are afraid that their property will lose its value and unable to get any type of money back if they decide to sell. According to the research done by Grace Bucchianeri, Homeowners are not happier because of financial stress.
Other reasons such as the average age of marriage may influence a decision of purchasing a home. The average age of marriage is currently 26.1, according to the U. S Bureau of Census. This is a huge jump compare to 1960 which the average marriage age was 20.3. The young generation seems to be more focus in other things that making a family and settle down. The U.S. apartment vacancy rate fell to 4.9 percent in the first quarter of 2012. In 2011 the rate was 9.7 percent for vacancy rate. There has been a dramatic increase on rentals according to the Census Bureau. With this big growth in apartment rentals, the multifamily housing development in June 2012 was up 63 percent from a year earlier. The industry is expected to hit over 1 million new apartments by 2015 (Walsh, 2012). Young people opt in to do short leases because they want and like the flexibility to pick up if a job arises or in the worst case scenario move back home if their job is eliminated.
Some people believe that buying a house is a waste of time and money. People think that renting a period of 30 years you might save the money you are putting down for the house and all the money for the closing cost, maintenance and so on. It could save you up to $90,000 in a 30 years lap if you only rent a property (Stoffel, 2012). For some people there is stuff that money can’t buy such as stability or emotional benefits. At the end it depends on the person and the type of life they decide to have. Some people hate commitments other people have a dream of having a house and owning a piece of territory. In a recent study done by Brian J. McCabe from New York University, shows that people that own their home are more likely to vote compare to renters.
Homeowners feel stronger ties to their communities. They are willing to participate more in organizations that could benefit their community. It shows that the homeownership is mediated by both stability and income. It is possible that citizens most likely to become involved in civic affairs are also those most likely to become homeowners. According to some researchers, the market will turn around—eventually. The young people will start getting older and will settle down. They will start getting married and forming a family and would like to be part of a community. When the house buying market starts increasing the back requirements will start loosen up. Banks will be more flexible when making loans.
Bucchianeri, G. W. (2011). The American Dream of The American Dilusion? The Private and External Benefits of Homeownership , 1-38. Edwards, E. (2011, October 11). The Universe. Retrieved August 2, 2012, from http://universe.byu.edu Gittelsohn, J. (2012, April 30). Bloomberg. Retrieved June 2, 2012, from Bloomberg News: http://www.bloomberg.com McCabe, B. J. (2011). Are Homeowners Better Citizens? 1-47.
Stoffel, B. (2012, March 8). DailyFinance. Retrieved June 2, 2012, from http://dailyfinance.com Walsh, M. (2012, July 16). Business Week. Retrieved July 2, 2012, from http://businessweek.com