U.S. Homeownership Expected to Rise for the Young

(Bloomberg) -- The “American Dream” could be on the verge of a rebound for some. The home ownership rate for young Americans will probably increase over the next decade to close to 60 percent from below 40 percent in 2016 as their incomes increase and they start families, according to Freddie Mac estimates. The data track two cohorts: Americans who were between the ages of 25-34 in 2016 and those who will be in that age group in 2025.

Freddie Mac determined:

• The home ownership rate of young adults will probably rise to 58.1 percent in 2025.
  • Under a more optimistic scenario, the ownership rate could rise as high as 60 percent; in a pessimistic scenario, 55.9 percent. A percentage point can translate to more than 500,000 more home purchases.
• The self-employed are five percent more likely to own a home. Higher levels of wealth are correlated with being self-employed.
• There's five percent less chance of affording a home in a metro area versus elsewhere.
• An estimated 700,000 young adults refrained from buying a home between 2000 and 2016 because costs outpaced incomes.

“Historically low mortgage rates and increasingly favorable employment conditions should have generated a far greater number of home purchases by young adults, especially in the last five years,” said Sam Khater, Freddie Mac's chief economist. “Unfortunately, home-price and rent growth above incomes -- driven primarily by a severe shortage of housing supply -- have been too high of a hurdle for many would-be buyers to clear.”

(Demographic Trends is a series of occasional articles examining population shifts ahead of the 2020 Census.)

To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net

To contact the editors responsible for this story: Kristy Scheuble at kmckeaney@bloomberg.net, Vincent Del Giudice

©2018 Bloomberg L.P.

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