The rate of homeownership in the U.S. has fallen to a low that, up until a relative handful of years ago, would have seemed unimaginable.
According to U.S. Census data, the rate is now just 62.9 percent, the same level at which it sat back in 1965. The rate of homeownership in America was nearly 70 percent before the bottom fell out of the real estate market as a result of the 2008 crash.
CNBC real estate reporter Diana Olick, in an article entitled, “Millennials cause homeownership rate to drop to lowest level since 1965,” informs us, as the title of her piece suggests, that the reason for such a low rate is principally due to the substantial financial challenges millennials now face in America. Writes Olick, “The drop in homeownership is largely due to a delay in homebuying by the millennials, who have the lowest ownership rate of their age group in history. Millennials are not only burdened by student loan debt, but they have also delayed life choices like marriage and parenthood, which are the primary drivers of homeownership.”
Among those quoted in Olick’s article is Svenja Gudell, Zillow’s chief economist, who points out that another reason ownership rates are so poor is because renting is proving itself to be “an increasingly viable longer-term option” for everyone, not just young people.
While it’s easy, and convenient, to see this as a problem resulting from the financial difficulties that typically plague young adults, the fact that the home ownership rate is the lowest it has been in a half-century telegraphs something much more ominous.
Take Svenja Gudell’s comment about the increased viability of long-term renting for everyone, not just young people. What does she mean by that, exactly? That older folks who should be homeowners sitting on a pile of equity…are not, and there’s nothing we should see as being amiss about that? “Viability” simply refers to having the fitness to survive, or, more generally, the ability to do something. OK, older folks have the ability to rent, just like anyone else. Wonderful. The real issue, however, is why so many of them are renting, as opposed to being homeowners moving closer to having fully-paid homes.
In other words, the “big picture” answer to why homeownership is low, one that far outsizes the millennial issue or problems unique to any particular demographic, is that the American economic infrastructure has been falling apart for decades now. The low-growth environment in which the economy has persisted for too long has deprived corporations of money for capital investment, and as that problem becomes greater, jobs and personal economic viability, more generally, end up in increasingly short supply. The abysmal home ownership rate is, in the end, nothing more…and nothing less…than a symptom of that.
By Robert G. Yetman, Jr. Editor At Large