The big housing news this week is that the homeownership rate has dropped to 63.4% which represents the lowest rate in 48 years. That news definitely is making headlines. Yet, to fully understand what this means we have to look at the story that created these headlines.
There is no doubt the homeownership rate has declined since the housing crisis. Here is a graph showing the homeownership rate over the last twenty years. It skyrocketed during the housing boom and has steadily fallen since the bust:
The story behind the headline…
The dramatic fall in the rate over the past year must be looked at very closely. The rate is determined by the “number of households” who rent versus those who own. Let’s assume you have nine friends thatlive on their own(thus forming a household); six of them own and three of them rent. That would mean that 66.6% (6 out of 9) of your friends that live on their own are homeowners.
Now, let’s assume you have another friend who has been living with his parents. He would not be considered a separate household because he lives within his parents’ household. Once that friend moves out of his parents’ home and gets a place of his own, he will become part of the household count. Let’s assume, since he is just starting out, that he moves into a rental.
When he does, you now have ten friends thatlive on their own. If six still own their home and four of your friends now rent, the homeownership rate of your friends drops to 60% (6 out of 10). The number who own didn’t decrease; but the percentage decreased.
With the economy improving and job numbers looking better, more and more young adults are beginning to move out and get a place of their own. However, most will start in a rental situation thus driving the “percentage” of homeownership down.Auction.comexplainedthe most recent drop in homeownership rate this way:
“This occurred as household formations popped, implying millennials are riding an improved labor market out of mom and dad’s house. Roughly a third of millennials live at home according to Census data, an elevated figure. Continued gains in the labor market will coax increased numbers out into their own places, a majority of which will be apartments, as this age cohort lacks the financial wherewithal to buy.”
What does this mean to the future of homeownership?
The great news is thatstudyafterstudyhas shown that Millennials aspire to homeownership as they still see it as a major part of the American Dream. As they get more comfortable with their financial situation, many of the Millennials who finally made it out of their parents’ homes this year will become homeowners over the next several years. An increase in homeownership rates will follow.
Author:Ryan McLemore Phone: 972-804-3474 Dated: August 14th 2015 Views: 254 About Ryan: Ryan's career started in 2002 with Citigroup’s marketing division where he offered full service fi...
Pinnacle Realty Advisors is a real estate brokerage firm specializing in residential real estate sales with additional services to support our clients’ needs and agents’ businesses. Our Mission is to provide extraordinary services and exceed our clients’ expectations by always committing to the highest levels of professionalism, ethics and standards in the real estate industry. Our pledge to you is to use all our resources, professionalism, and ethics to obtain the highest price for your property in the least amount of time.
Pinnacle Realty Advisors is a real estate company with a solid structure and foundation with a commitment to success, productivity and positivity. We focus on helping good things happen for good people. Simply put, positivity is interwound in our culture and is integral to our success and productivity.
Pinnacle Realty Advisors has an unwavering commitment to:
HONESTY – We wear it on our sleeves.
INTEGRITY – We have a strong commitment to our reputation. If something isn’t right, we’ll follow through to correct it.
HIGH QUALITY PEOPLE – Pinnacle Realty Advisors prides itself in only employing motivated, highly competent individuals. If you are not a top performer, you are not employed here.
INNOVATION – We are constantly challenging the status quo by learning, adapting, and finding innovative ways to deliver a better real estate experience.
TRANSPARENCY – We say what we mean and do what we say.
QUALITY PRODUCT – We believe in the value of the service we provide.
SIMPLICITY –We strive to make transactions with our clients and associates as seamless and simplistic as possible.
WORK ETHIC – We are passionate about what we do. Our team is committed to success and whatever it takes to achieve it.
BALANCE – Work hard. Play hard. We encourage our employees to maintain a healthy personal to work balance.
CAMARADERIE - – We enjoy serving our clients and coworkers and cherish those relationships deeply.
If you are interested in a new career in real estate or already have a real estate license, but wish to learn more about our company, please contact us directly to set up an interview. We offer our agents 100% of their commission, company leads, training and coaching with no office, desk fees or monthly marketing fees ever.
Live in your Dream Home Now. 1. Find your Dream Home2. Move in an
"The home buying process was foreign before I started my home journey purchasing process. A friend
referred me to Terrie. Word of mouth is the best method! Terrie answered all my concerns and questions
regarding the entire purchasing process. She was able to walk me through each of the buying process step
by step. The best experience was that she listened to my needs and understood what I was looking for as
far as my budget. She was available every time, I scheduled an appointment to view a property within
reasonable time frame (same week). Thank you Terrie for making my first home buying experience not an
only a great experience but negotiating in many angles beyond the asking price. Thanks Again!”"