According to a Wall Street Journal piece, homeownership in the U.S. fell to its lowest rate in 20 years.
Figures from the Commerce Department show that just 63.9 percent of all households owned homes – the lowest since 1994 and down from 65.1 percent from a year ago. By contrast, 2 million more households rent – a rate that continues to grow.
The drop began in 2005, declining from 69.2 percent. The peak, however, is the result from a push toward homeownership that began in the 1990s and continued through the Aughts.
But while the housing crash seems like an obvious factor behind this descent, the Urban Institute estimates that 2014’s figures are part of a larger trend that’s expected to progress to 2030. By that point, it’s estimated that just 61.3 percent of households will own homes. What else is responsible?
More Renting
As mentioned above, the number of renters is steadily increasing. That’s not to say that more people aren’t owning homes. Rather, the rate of households deciding to rent has surpassed it at a faster rate.
This trend should create a ripple effect across the housing market. Developers will eventually cater to renters, building apartment complexes instead of single-family properties. Remaining single-family homes, instead, may be rented out.
The Recession
The Recession and the housing crisis overlapped for a few years, but the former stands out in one major way: It damaged household wealth and put careers and family-forming on hold. Those that built it up during the ’90s lost it in the late ’00s, and haven’t yet been able to fully recover. As a result, large demographics – young adults and minorities – have fewer opportunities to purchase a home.
At the same time, minorities are becoming a greater share of the population, and the age of marriage and child-bearing is higher than it was three decades ago. In response, more individuals and families find renting to be more economical.
Stagnant Incomes
Going hand-in-hand with the Recession, the limited number of jobs at lower salaries has put a moratorium on Millennials’ purchasing power. Couple this with student loans, and the largest demographic since the Baby Boomers can’t put 20 percent down for a mortgage payment.
At the same time, the Boomers have started downsizing their lifestyle, making the move from owning a house to renting in retirement communities or living with their children. The result is more elderly adults looking to rent or purchase a smaller property.
Greater Awareness
It’s said that, up to the housing collapse, practically anyone could get a home. Few understood the full commitment, while brokers, banks, and lenders appeared more than happy to sign someone unable to meet the minimal financial obligation.
Eight years later, the financial landscape has completely changed – and for the better. Lenders must follow stricter standards, while the average buyer has a better grasp at what a mortgage entails, from loan types to monthly payments, insurance, and interest.
If you feel it’s time to own a home, make your move in Central Connecticut with By Carrier. Find a new property suiting your needs in any of our communities.