“Housing Bust Lingers for Generation X”

The Wall Street Journal discusses how Generation X’s ability to own a home was significantly affected by the housing bubble:

The data show an enormous swing in the fortunes of people born between 1965 and 1984, the group defined by the Harvard Joint Center for Housing Studies as Generation X.

Compared with previous generations, Generation X 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 culprit: a historic bull market for housing, fueled in part by easy-to-get mortgages, that encouraged record levels of home buying until the financial system cracked and the housing market collapsed. Earlier generations such as baby boomers, who entered the market before the frenzy of the early 2000s, have fared better.

Wrong place, wrong time? The effects of this could be long lasting:

  1. Less wealth in the long run since owning a home is one of the biggest investments Americans make.
  2. What does this mean for retirement, both for the money that could be gained in selling a home and the need for different housing options as people age?
  3. With the assumptions Americans make about community involvement and homeownership (as compared to renting), does this mean a whole generation is less involved in community life?
  4. Will economic changes like this affect future decision making both for Generation X and their children who saw what happened?

In other words, we won’t know how important this change is for quite a while.

Fortysomethings have more influence on sluggish housing than millennials

While millennials currently have lower homeownership rates than in the early 2000s, Derek Thompson suggests fortysomethings are the bigger issue for the sluggish housing market:

The economy has a Gen-X problem. It’s a small cohort with a much-smaller-than-usual homeownership rate. And people wonder why the housing market is sluggish.

Update: Read Trulia’s Jed Kolko on why the middle-aged are the true lost generation of homeowners. In short: They bore the brunt of the foreclosure crisis:

In 2005, the year when the true homeownership rate peaked for most age groups, 25-to-29 year-olds were the age group for which homeownership was highest relative to the demographic baseline, followed by 30-to-34 year-olds. These were first-time home-buyers getting easy credit for overpriced homes; then, they bore the brunt of the foreclosure crisis, losing their homes and wrecking their credit history…

The millennial generation was still in their early 20s or younger in the mid-2000s–too young to have bought during the bubble and then to have suffered a foreclosure: Only the oldest among the 18-to-34 year-old group in 2013 would have been of home-buying age during the bubble.

Interesting data. Generation X had bought into the American Dream and the importance it places on owning a home but they were badly burned by the housing collapse. They were in the wrong place at the wrong time: eager to buy homes, able enough to overpay based on decent jobs, and particularly indebted when their housing values tanked.

There is another issue at play here: while millennials may not have been very involved in the economic crisis, they are the generation that could continue the homeownership ideal among Americans. If they choose otherwise – and perhaps they are watching those older than them – then there may not be much of an upward tick compared to Generation X.

Side note: a funny quote from earlier in the article.

It is a truth universally acknowledged that a journalist in possession of a negative statistic must find a way to blame Millennials for it.

Generational blame is alive and well even in our advanced rational and enlightened age. Talking about generations is an easy shorthand for analyzing social trends. Whether such talk holds water compared to other age breakdowns or other data may be another matter…