Homeownership rates continued to decline in the second quarter of 2016 — falling to record low levels not seen since 1965 — according to new data released by the US Census Bureau earlier this week. The current homeownership rate of 62.9 percent is not only the same as it was back in 1965, when the Bureau began tracking the metric, but a considerable drop from 2004’s record high of 69.2 percent.
Regionally, the Northeast and West lagged behind the rest of the US. with rates of 59.2 percent and 57.9 percent, respectively. Rates were highest in the Midwest, 67.7 percent, and the South, 64.8 percent — down very slightly in the Midwest, but unchanged in the South from Q1-2016.
The largest gap was seen in the age brackets of homeowners, with more older Americans owning homes than younger Americans. The 65 and older range ranked highest in homeownership, with a 77.9 percent rate. On the other end of the spectrum, the under-35-year-old bracket averaged only 34.1 percent, a staggering gap. In fact, that number was still over 20 percent lower than the 35 to 44-year-old bracket, which had a 58.3 percent rate of homeownership.
With such a wide divide in rate of homeownership among the under 35 set, or “Millennials,” it is worth looking at several factors that may directly affect Millennials.
More than ever, Millennials are burdened with enormous student loan debt. Since 2004 the level of student loan debt has skyrocketed from roughly $364 billion to over $1.2 trillion in little more than a decade, according to Federal Reserve Bank of New York data.
In 2015, an estimated 4.6 million low-income borrowers opted to payback their loans as a percentage of their income over the larger, higher interest payments they were previously saddled with, says a Bloomberg article from May 2016.
Millennials are also part of an increasingly expensive rental market, where renting longer-term becomes the viable alternative to buying when income levels don’t provide enough room for savings. Worse yet, the overall rise in rental prices nationwide has further worsened more young renters not being able to save money for the downpayment on a home purchase, finds the WSJ.
“The falling homeownership rate is a sign that renting isn’t only for those just starting out or making a transition, but becoming an increasingly viable longer-term option,” Svenja Gudell, chief economist at Zillow, told CNBC.
Renting also allows individuals to keep a roof over their heads as potential home buyers struggle to earn enough to save for a down payment. “Incomes are not rising quickly enough to support new homeownership, and the inventory remains too tight to allow for meaningful access to affordable housing,” according to Gudell.