Business

Why We May See A ‘Generation Of Permanent Renters’

Following the subprime mortgage crisis from 2007-2009, the United States has seen a slow but noticeable recovery for the housing market but has left behind much of the middle-class.

According to the National Association of Realtors, home prices have risen in the majority of housing markets across the U.S. and are just 2 percent lower than they were before the subprime mortgage crisis.

While this may appear to be great news for the American housing market, many Americans are losing rather than winning from this recovery. Analysis by the Black Knight Financial Services finds that the recovery has actually left behind many middle-class Americans.

The number of houses that are 30 days past due or in foreclosure is up by 9,000 from last month. Also, the total U.S. loan delinquency rate is by over one percent.

Findings also show that in many American cities, the recovery has “deepened disparities between the rich and everyone else, such as in Boston, where gentrifying urban neighborhoods have thrived and far-flung suburbs have fallen behind,” reports the Washington Post.

Lawrence Yun, chief economist at the National Association of Realtors, said that “the losers are clearly the rising rental population that isn’t able to participate in this housing equity appreciation. They are missing out on [a big] source of middle-class wealth,” according to an interview with the Wall Street Journal.

Homeownership rate is at a 51-year low at 62.9 percent, and is expected to fall as low as 58 percent in 2050.

Susan Wachter of the Wharton School of Business noted that “we have historic lows for young households in terms of ownership,” and she warns the trend looks like it will continue.

It could be that the National Association of Realtors is troubled by this fact, because they came out with a report in June showing the top 10 cities for “aspiring millennial home buyers.”

From the age groups of 30 and under, and 44 to 30 years of age, there are more renters than borrowers and at no small margin.

Tenure by Age of Population
Age Distribution People in Rental Housing Share  People in Owner-Occupied Housing Share
Under 30 Years Old 55,916,372 51% 66,868,632 33%
30 to 44 Years Old 25,219,932 23% 35,872,732 18%
45 to 64 Years Old 20,214,476 18% 61,975,072 31%
65 Years and Older 8,421,411 8% 36,304,272 18%
Total 109,772,192 100% 201,020,704 100%
Source: NMHC tabulations of 2014 American Community Survey microdata. Updated 11/2015. Note: Does not include non-housing units.

Home building has been slow to recover also, with fewer homes being built due to less demand for new home purchases.

Homeownership has long been a main asset for American families, and is one of the largest stores of wealth a family can have. Families can use their homes to help fund their children’s college education and many other endeavors. Also, state and local property taxes are deductible which is another incentive for homeownership. With those tax deductions, American families have more disposable income to stimulate the economy in other sectors.

If this trend in declining homeownership continues, it will be interesting to see where Americans find their store of wealth in the coming decades.

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