Title Source Blog Why Homeownership Is at a 48-Year Low

Can you count multiple friends or family members who, for whatever reason, just don't seem to be that interested in owning a home right now? If so, you're not alone. Homeownership is down. Way down, in fact.Earlier this year, the U.S. homeownership level dipped down to a 48-year low. Just 63.4 percent of households owned their home in the second quarter. That's the lowest level since 1967, in records going back to 1965.While a near fifty-year low may be shocking, it's important to point out we didn't get here overnight. As a recent Wall Street Journal graphic illustrates, homeownership peaked at 69.2 percent by the end of 2004, well before the housing bubble burst, and has been steadily declining ever since. And while the next question is "why?", there's no one easy answer. In this post, we'll take a closer look at some of the factors contributing to this declining homeownership rate, starting with the economy.Wages and JobsWhen it comes to wages and job growth, the current economic picture has several sides. By August of this year, the latest jobs report was touting an unemployment rate of 5.3 percent - a much-appreciated seven-year low. Reuters speculated at the time that the numbers could bolster the case for a fall interest rate hike, though a hike didn't come to pass.Yet unemployment is only part of the picture. The Wall Street Journal recently reported on the growth differences between high-, middle-, and low-wage jobs uncovered by Georgetown University's Center on Education and the Workforce. More than a million new high-wage jobs have been created since the recession. These are the jobs helping to fuel housing and economic booms in pocket markets across the country.However, middle-wage jobs paint a different picture. According to the report, these jobs, with wages ranging from $32,000 to $53,000 a year, fell the most and have yet to recover all their losses. In many markets, first-time homebuyers would fall into this middle-wage job range.These stats are reflected in worker sentiment. The MacArthur Foundation's 2015 Housing Matters Survey found 40 percent of Americans still felt the country was in the midst of a housing crisis. In follow-up calls, the Wall Street Journal reports many respondents suggested a higher minimum wage might help. Beyond just recession figures, such sentiment is also backed up by wage stagnation data, which hasn't shown notable improvement for a few decades.The recession, small gains in middle-income jobs and overall wage stagnation don't account for the long-term decline of homeownership. The figure started falling before the bubble burst and the recession took hold. Homeownership climbed sharply beginning around 1995 for nearly a decade, despite middling wage growth. And the stark distinctions between job tiers after a recession is reportedly new, emerging after homeownership began to decline. Other factors appear to be at play. Price ReboundsA fairly solid rebound of home prices may have also played a role. Home prices in June marked a 40-month climb nationally, rising 6.5 percent year-over-year. By August, a year-over-year price increase of 6.9 percent was reported by CoreLogic's Home Price Index. Currently, home values are only 6.3 percent below the index's April 2006 level, after falling and recovering double-digits in the recession and economic recovery. Meanwhile, the latest S&P/Case-Shiller Home Price Index shows Denver and Dallas home values above their pre-recession peaks.Karen Krupsaw, vice president of real estate operations at Redfin, recently told the Wall Street Journal that buyers were "worried about too-high prices and are more cautious about making offers." That's especially true for buyers who may not be in strong financial situations due to the aforementioned jobs and wages setbacks. For these buyers, price may be a big reason they're not in the market, but it's hardly the only one.Inventory Shortages and Building CutbacksTwo factors driving the current years-long valuation increase is the slim inventory of existing homes and a lack of low-priced new construction. Anand Nallathambi, president and CEO of CoreLogic, singled out "supply constraints" as one of two factors that lead to "severe shortfalls" in affordable housing that may be pushing home prices up into 2016, and possibly beyond.At a panel discussion earlier this summer, top economists for Redfin and Zillow voiced concerns that builders were neglecting the entry-level market when it came to new construction. The economists contended that spec building single-family homes is thought to be riskier now than before the recession, while a separate report found that new rules may be hampering new condo construction, a prime vehicle to homeownership for first-time buyers.As finance blogger Bob Sullivan pointed out in August, a healthier housing market would provide a "wide spectrum" of housing options - including those for starter-home buyers. For now, it appears we're missing the lower end of that spectrum.Rising RentsCoreLogic's Nallathambi also mentioned a second factor leading to affordable housing shortfalls and lower homeownership - rising rental costs. Rising rents have been plaguing locations in the Bay Area, Los Angeles, and New York for some time, but the trend appears to be spreading. Even renters in cities like Denver, Atlanta, and Nashville are now feeling the heat.And while some have posited that increasingly uncomfortable rents will spur more homeownership, that may remain difficult for Americans spending their down payment savings on rental increases and who lack other resources.But even if all these factors weren't a problem, if more Americans could move into homeownership, would they want to right now? Isn't there a generational shift happening?Generational DifferencesMuch digital ink has been spilled covering the quirks of the millennial generation over the last few years. Some of it can be dismissed as age-old "kids these days" critiques. However, there are some definite differences between Generation Y and their forebearers. It's frequently said that millennials, who now make up the largest segment of the U.S. workforce, are more into buying experiences than things. Car ownership among Gen Y has finally started to pick up, though millennials still drive less than their parents. Homeownership? That's a more nuanced picture that for now keeps evolving.ConclusionSo which factor is responsible for U.S. homeownership's 48-year low? It's hard to say. Building starts are related to economic health and inventory shortages. Economic factors squeeze buyers from both sides, with rising rents and home prices locking some out of the market. Millennial sensibilities may also be a factor.Whatever the cause for the current slowdown, it's hardly reason to lose hope. In many ways, 2015 has been a good year for real estate. The summer homebuying season was strong, home appreciation is helping current homeowners, and economic growth is indeed helping some segments of the population move into homeownership. Lastly, just because homeownership has declined to 1967 levels doesn't mean it can't or won't rebound to its 1970s, 1990s, or mid-2000s highs. It's climbed before and in all likelihood will do so again.