Older generations suffer their own real estate woes

Middle-aged adults are experiencing their own struggles with finding affordable housing.

Middle-aged adults are experiencing their own struggles with finding affordable housing.

 

Much has been written lately on the widespread financial troubles of America's newest generation of adults, commonly called the millennials by social scientists and the media. In one of the most sweeping investigations of this age group recently, Pew Research Center found that more U.S. adults ages 18-32 were living with their parents rather than on their own or with a spouse than at any point in recorded history. Pew and other experts attributed this new trend to a slow-growing economy and the prevalence of burdensome student debt, each of which have priced young adults out of a competitive housing market.

"Millennials aren't the only ones feeling left out of the market."

However, millennials aren't the only ones feeling left out of the real estate boom. According to an analysis of Census data from The Wall Street Journal, middle-aged adults are reporting far lower rates of homeownership than historical averages. This indicates that even consumers with more financial history and established savings are having trouble finding affordable housing.

"Compared with previous generations, Generation X [those born between 1965 and 1984] went from the most successful in terms of homeownership rates in 2004 to the least successful by 2015, according to the data, which date to the early 1980s," The Journal wrote.

Much of Generation X's poor housing market performance could ultimately be chalked up to bad timing. According to a real estate executive who spoke to The Journal, this generation was in the prime of its homeowning years just as the biggest economic downturn since the Great Depression decimated property values and long-term savings. Data from the U.S. Census Bureau show in 2004, Generation X - then ages 25 to 34 - boasted a homeownership rate of almost 50 percent. This was the highest that figure had been since the Census Bureau began collecting this data in the 1980s.

But by 2015, after a disastrous bust and only modest recovery, Generation X was left worse off than their elders. Homeownership for adults age 35 to 44 registered at 58.5 percent, even though this age group had historically seen an average rate of 65.8 percent.

Mortgage
Middle-aged adults are experiencing their own struggles with finding affordable housing.

Housing interrupted

As The Journal explained, real estate economics has always relied on a linear trajectory in relation to homeownership and demographic trends. Young people are expected to spend more time renting initially, then gradually move into a small home, and progress to bigger property as their family grows. But with younger buyers being delayed and older homeowners getting sidelined, this traditional pattern seems to have been upended. This will make it more difficult for the supply side of the real estate market to successfully predict demand and respond in time. The effect of this trend could already be playing out as the stock of entry-level homes continues to dwindle.

"We need them [older generations] to be buying houses and pushing the market," urban planning professor Dowell Myers told The Journal. "But they're not. They're not moving. The whole system is gridlocked."

Brighter days ahead?

Continually low interest rates on mortgages and limited inventory have kept the housing market generally competitive. On the other hand, basic economic indicators are improving dramatically, which could lead to better outcomes for prospective homebuyers of all ages. The most recent jobs report from the Bureau of Labor Statistics found that employment numbers exceeded expectations in July, capping yet another month of low unemployment rates. In addition, wages have trended upward, increasing every month since October 2015, according to the Federal Reserve Bank of Atlanta.

It is hoped that these strong growth indicators will translate into a more evenly divided housing market. But these trends take time, and the ultimate impact may not be known for several years.