Gen-X Suppressing the Home Ownership Cycle
While Millennials or the Gen-Ys are often blamed for the decline in the homeownership, Gen-Xers are partly to blame for the drop in homeownership rates especially after the housing bubble. Stats from the Harvard’s State of the Nation’s Housing 2015 report shows that homeownership among people aged between 35 and 54 has significantly dropped since 1993. When the people at this age group were first-time home buyers, that’s when the market peaked.
But it seems most of them haven’t opted for better homes or some were even forced to be renters due to foreclosure. Also, the older members of Gen-X were at the age when most of them traded up to bigger apartments just before the housing crisis. These people were subject to the drop in home prices which made some homes to be subjected to underwater, distress and delinquency.
“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” ~ John Quincy Adams
Why Gen-X Is To Blame
The current homeownership rate which is 63.7% has been as a result of many factors. Baby Boomers have been sustaining this rate but because of the small size of Gen-X, they might not be able to support this trend. On the other hand, the Millennials have low homeownership rate but stand a better chance of getting good jobs and they’ll enter the home buying market. But what can the group between 35 and 54 do?
These group of people should be opting for better housing and their trading-up activities should be able to free up inventory for the Millennials. Unfortunately, this is not happening as the number of homeowners aged 35-39 has significantly declined by 23% for the last decade.
Are Gen-Xers Are Staying In the Rental Market for Long?
Gen-Xers are reluctant in home buying making them to stay in the rental market longer. These generation is not allowing a smooth flow along the homeownership cycle (renting and moving onto homeownership) so that Gen-Y can get cheap homes. The transition is slow, pushing most of the Millennials to be renters. As a consequence, rental vacancy rates have risen hence elevating rents which makes even harder for the young generation to save for a decent down payment.
Stagnant wages are not keeping up with the pace of the rising prices of homes. Wages have been increasing at a very slow rate as incomes are still at mid-1980s levels.
Potential Homeowners Are Hesitant
Reports indicate that those people who can afford to buy a decent home are hesitant in doing so as they are unsure of the stability of the market. If Gen-Xers who lost their homes during the bubble start buying homes, this will give confidence to the first-time home buyers. About 11 million distressed homeowners were foreclosed during and in the wake of the crisis but only 2 million of them have returned to the market. The remaining 9 million people, who are now renters are still fixing their spotty credit reports and saving for down payment and it would take time before they enter the market again.