Tag Archives: homeownership

The role of housing in the unsettled lives of American 30 to 45 year olds

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Where does owning a home fit in the changing lives of adults after emerging adulthood and in “established adulthood”? Here are some hints:

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When Mehta appeared on camera bouncing her newborn in her lap, that professor started laughing sympathetically. She’d just read Mehta’s 2020 paper on the life phase from age 30 to 45, which described it as a hurricane of major changes and responsibilities. Career advances, marriage, parenthood, homeownership, care for aging parents—for many people these days, the paper had argued, all of those milestones fall in a short and furious chunk of time. And here Mehta was, embodying that point.

The connection between Mehta’s circumstances and her academic focus wasn’t a coincidence. Mehta was in her 30s when she started noticing that no one seemed to be studying her own age group. Her colleague Jeffrey Jensen Arnett, the author of Emerging Adulthood: The Winding Road From the Late Teens Through the Twenties, had become an expert in ages 18 to 29. Psychologists of middle age, meanwhile, were usually observing those in their 50s and early 60s. She’d reached a part of life that was anything but quiet, yet when she looked to her field for answers, she heard relative silence.

Now, at 45, she has interviewed many, many people in this stage, which she named “established adulthood.” She believes that life for the youngish—especially for women—is getting only more hectic. The average man is parenting (a little) more than he used to, and the average woman is working outside the home (a lot) more than she used to. And compared with eras past, people today tend to be older when they begin hitting the classic landmarks of adulthood. A typical young person might once have, say, met a partner in their teens, married and started a family at 20-something, then taken on more career responsibility or begun caring for an ailing parent while in their 30s. Now all of these formative experiences are getting compressed. Many people do cherish this time, Mehta told me. But the fact remains that they’re in the “rush hour of life”—and they may be dealing with a milestone pileup…

Recently, this period of uncertainty has been getting longer: Many young people are saddled with debt, searching for work in a brutal job market, unable to afford buying a house. Building a career, a home, or lasting relationships—all things that can help shape a person’s sense of self—have become more difficult. And as emerging adulthood expands, it eats into the next stage of life.

From what I have seen of different surveys and published work, a majority of adults still want to pursue homeownership. Buying a residence is still an important part of adulthood and achieving the American Dream.

But this summary above and other work also suggests that this may be delayed and/or more difficult than in the past. The expectation in the postwar decades that young adults could buy a home in their 20s and perhaps on one family salary is hard to live up to today. A variety of social factors mean that homeownership is now delayed. This means more years of other living arrangements plus potential changes to how people feel about homeownership.

Given this increased difficulty, it would not surprise me if in the next decade or two fewer adults ages 18-45 say they want a home. When faced with obstacles, some people will turn to other priorities or adapt to the possibilities they do have. And it would get interesting if less than a majority of adults say they to own their residence; how does this change individuals, communities, the housing industry, and more?

Many don’t seem to like a 50 year mortgage; some lenders already offer a 40 year mortgage

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As people reacted – mostly negatively, from what I saw – to the possibilities of 50 year mortgages in the United States, one article noted that 40 year mortgages has a history and can be obtained now:

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I remember a time when a 40-year mortgage — and a 50-year adjustable rate mortgage — built some buzz back around 2006 and 2007 for people who were struggling to buy a home. It didn’t work out well if you had to sell when home prices collapsed.

The 40-year mortgage has a history going back to the early 1980s, according to an earlier report in the Detroit Free Press, part of the USA TODAY Network, when 18% fixed-interest rates were squeezing consumers out of buying homes. It never proved to be the most popular product…

If you shop around, some lenders are offering 40-year mortgages now.

Rocket Mortgage notes online that the Detroit-based giant offers a 40-year mortgage with the first 10 years being interest-only payments. These mortgages can be available for loan amounts between $125,000 to $2 million.

I wonder how many people apply for and receive 40 year mortgages.

Reading the reactions to the idea of a 50 year mortgage, I was struck by how much of the conversation was dominated by financial details. How much equity would a homeowner have after 20 years? When would the interest parts of the payment taper off compared to paying down principal? How would interest rates be different for a 50 year loan? I should not be surprised given how much homeownership is now seen in the United States as a financial investment. It is a tool to build wealth, perhaps the biggest tool most people will have.

But homes are about more than that. Americans have ideas about the virtues of owning a home compared to being a renter. A homeowner might feel differently and act differently regarding their property if they have a mortgage. Numerous neighborhoods and communities are structured around homeownership (such as many suburbs). Having a stable and affordable residence can help contribute to numerous positive outcomes.

Are we at a stage when public discussions about housing then are exclusively or are primarily about the finances of owning a home – which are certainly important – and not any influential factors that might encourage or discourage people from owning homes in the United States?

The geographic restrictions placed on Chicago’s Black residents by the turn of the twentieth century

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Historian Elaine Lewinnek in The Working Man’s Reward summarizes where Chicago’s Black residents lived in the late 1800s:

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By 1870 Chicago’s five thousand black residents lived in every ward of the city as well as numerous suburbs. Chicago had instituted some progressive policies during Reconstruction, including a civil rights law and, in 1874, an officially desegregated school system. After the collapse of Reconstruction, many blacks who had held political office in southern states relocated to Chicago in what observers called “the Migration of the Talented Tenth.” By 1893 Chicago’s black population was fifteen thousand, still just a small fraction of the more than million Chicagoans. Some blacks settled north of Chicago, near domestic service jobs in the suburb of Evanston, as well as on the near West Side. Many gathered in the neighborhood around Clark and Harrison Streets, on the south fringe of Chicago’s business district, an area that escaped the Great Fire of 1871 but was completely burned in 1874.

During the 1880s and 1890s, pushed by racism and pulled by their own preferences for living near black-led institutions, new black migrants were increasingly limited to Chicago’s Black Belt on the South Side. Extending just two blocks west and east of State Street, stretching south to Thirty-fifth Street and eventually Fifty-fifth, this narrow strip contained 56 percent of Chicago’s blacks in 1900, 78 percent, and 90 percent by 1930. (152-153)

This mirrors national trends. W. E. B. Du Bois discusses this in The Souls of Black Folk where he looks at what was possible during Reconstruction and then quickly disappears once that period ends. James Loewen argues in Sundown Towns that after the movement of Black residents all over the United States after the Civil War, many communities in the United States by the late 1800s restricted Black people and other people of color from staying or living in their towns.

And Chicago is a particularly noteworthy example of this because of how strong these geographic lines become. By the early 1900s, violence, formal and informal policies, and social interactions reinforce these boundaries in such a way that Chicago is one of the most racially segregated cities in the United States by the end of the century.

But these boundaries were not always there. They do not have to be there in the future. Lewinnek argues they were the result of particular actions and conditions, including the efforts of working-class homeowners.

The percent of income Cook County residents pay to own their home

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How much does it cost to be a homeowner in Cook County?

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Homeownership expenses — including typical monthly mortgage payments, homeowners and mortgage insurance and property taxes — accounted for 29.2% of the average income earned by a Cook County resident as of the middle of this year, up from the 23.2% historical average based on data collected between 2005 to 2025, according to ATTOM, a national property data provider.

That is lower than the 33.7% national average and slightly higher than the 28% typically recommended by mortgage lenders, the data shows.

For the average Chicago resident, 42% of their mortgage payment is for expenses such as property taxes and insurance, marking it the fourth-highest share in major markets across the country, according to Andy Walden, head of mortgage and housing market research for Intercontinental Exchange, a data and financial technology firm. This is in large part, he said, because of property taxes.

This particular article suggests these costs are high for those who want to start a family; they may be able to purchase a home but there is not much left over after that point. The figures above help provide context for the 29.2% homeownership cost:

  1. This is higher than the average in the past. Homeowners in Cook County are now paying more per month than previously.
  2. The figure it higher than the 28% lenders might recommend.
  3. But the Cook County percentage is lower than the national percentage.
  4. And out of that overall percentage, Chicagoans tend to pay more for property taxes and insurance.

And a little more context: the homeownership rate in Cook County is about 62.5%.

All interesting information. Owning a home takes resources for purchasing it and maintaining it. The same lending practices that make it possible to get a mortgage for 30 years also mean costs for that long. But could the issue be something different: the costs of having children? How have those costs changed over time?

The Chicago area is often regarded as having a medium cost of living. Big cities in the Northeast and West cost more, places in the South and Midwest cost less. People living in these different contexts adjust. With the relative costs of living, how much does it differ to raise children in each place?

Homeownership is one of the biggest financial investments that a person or household will make. How many Americans now experience or believe that pursuing homeownership, a vital part of the American Dream, impedes their ability to pursue having kids?

Whether Americans will be happy if/when housing values go down

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If housing prices drop, will Americans be happy? The CEO of Redfin has thoughts:

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I think we’re at an inflection point. So mostly people who have had to sell their home have been able to do so quite easily over the past two or three years. So even in the post-pandemic correction, it was fairly straightforward.

But now home sellers are struggling, especially people who bought a house during the pandemic. We are talking to them about lowering their price and they can’t, because they’ll be short on their mortgage. Now, we’re not going to have anything like the great financial crisis in 2008, where there was a wave of foreclosures. But for a particular population of folks who did buy during the pandemic, it has suddenly gotten very hard to sell their home and pay off their mortgage. And so right now the market is just teetering in a very unhappy equilibrium. I think that prices will come down, and I’m one of the people who views that as good news.

When bread prices come down, when gas prices come down, most Americans view that as cause for celebration. But when home prices go down, about half of us are worried about it and the other half are throwing a party. And really, for the younger generation, we need prices to come down…

So about 75 percent of American homeowners have a mortgage below 5 percent. We’re unlikely to see a rate like that anytime in the foreseeable future, and so those folks create this rate-locked inventory. Many, many people in America—more than half of all Americans—really couldn’t afford to buy their own home at current interest rates. So it’s very common for us to go to a listing consultation with someone who has had another baby or is going through a divorce, had some kind of life event where they need to move, and when they realize what they’re going to be able to afford from the sale of their home, they decide to stay put instead.

If the goal is to have a majority of Americans happy about housing prices, that might be hard at this particular moment. As described above, different actors may want higher or lower prices. Those wanting to rent or buy want lower prices. Those who are looking to sell might want higher prices. And the 0homeownership rate in the United States is a little over 65%.

But one hint above is that more people – a majority – might win if prices come down. If prices are too high and interest rates stay roughly where they are, there is little movement in the housing market. So could Americans be convinced that a drop is good? This would help more people get into the market and others to sell. (I wonder if it also might create more demand that would then raise prices again.)

Perhaps this is not the right topic in the first place. Focusing on this particular issue and moment obscures the larger issue: what is the long-term trajectory for American housing and for the ability of buyers and sellers? Do people perceive they can purchase a residence? What policies further (or hinder) a longstanding American idea that homeownership is a critical element of the American Dream?

American Dream past and future about status? Stability?

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What is the American Dream actually about? An editorial in the Chicago Tribune considers how younger Americans see the American Dream:

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Lower marriage rates and lower homeownership among younger adults seems to indicate the increasing elusiveness of what we have long considered the American Dream of owning your own place and building a family.

So what’s going on? Is this a generational shift in values — or the predictable result of a system that’s become too expensive and too precarious for anyone to gain a foothold?…

So is the American Dream disintegrating? Or is it changing shape?

We think the answer is a bit of both. Affordability plays no small role in explaining why fewer young people buy a home or choose to go into debt for a degree…

If Gen Z does bring marriage back into fashion, it won’t be a return to tradition so much as a reinvention of it — one that values stability, yes, but also flexibility and purpose. That’s the American Dream now.

The suggestion above is that the American Dream involved (1) homeownership and (2) having a family. Have these two things and you have made it. The contrast is provided at the end. Younger Americans perceive more instability in the economy and in relationships. The old path of securing a home and family is not as easy. They want something different: “flexibility and purpose” rather than “stability.”

How much of a change is this? The key might be getting at the motivations behind achieving these goals. What was having a home and family about? Reaching a certain middle-class status? Keeping up with the Joneses? The shift toward “flexibility and purpose” is about what exactly: self-sufficiency? Status? A better sense of self?

In other words, I wonder if this is more about changing methods to achieve the American Dream rather than a shift in goals. As noted in the editorial, many younger Americans still want to own a home. Many will pursue relationships. But the means to getting here may have changed. There is a narrative now that this former path was easy: the decades after World War Two provided easy opportunities for many Americans to buy a home and start a family. Perhaps this was a unique time in history with relative prosperity and the conclusion of a major war where the United States emerged as a winner.

Imagine several decades from now when the postwar era is one hundred years ago. Americans may still want the same things – purpose, a sense of achievement, a certain status – but what form that takes may have changed. What marks a middle-class life may look different. Feeling accomplished or stable may take a different form.

The “natural flow” of people toward renting rather than homeownership?

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In discussing the construction of a new suburban apartment building, one person describes the demand for the apartments:

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“We have seen the rent increases in the suburban market in general have been pretty strong over the last few years,” he said. “There’s a lot of people who normally would have gone out and maybe rented for a few years and then bought a home, are not doing that. They’re staying in apartments longer.

“So you have the natural flow of new people coming in and less people walking out the door for home ownership, and a lot of that is just due to the high interest rate environment and people wanting to retain the flexibility of renting right now,” Devries explained.

Is this “natural” that more people or certain people at the moment are willing to rent compared to own? These two paragraphs mention several reasons why this shift did not just happen:

  1. Increase in rents. This means at least some apartments are available to those with the resources to pay for it.
  2. Higher mortgage rates mean homeowner’s monthly payments are higher.
  3. Renting can offer flexibility in a tight housing market or when people are feeling economic uncertainty.

These are the result of social, economic, and political forces. And I wonder if all of these people who find it “natural” to rent now would prefer to own a property. If conditions were different, would they rather purchase a home, condo, or townhome? Or what if this to-be-constructed building did not contain apartments but rather contained condos?

The “natural” flow in American life for roughly the last century has been toward single-family homes and homeownership. This takes different forms – not just homes but condos and townhouses – and may not appeal or be available to everyone. But my guess is that if the three listed conditions above were more favorable toward purchasing units, that is what more people would seek and developers/builders would produce.

The Chicago bungalow as a symbol of early 20th century success

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Living in a Chicago bungalow became a symbol of a successful life:

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The humble bungalow made it possible for Chicagoans to realize the American Dream of home ownership. In the first part 20th century, between 80,000 and 100,000 bungalows were built in Cook County. The majority went up between the end of World War I and the beginning of the Great Depression, making many about 100 years old. Many were home to first-generation immigrants. They formed an arc around the city’s center known as the Bungalow Belt.

It “stretches all around the city, from South Shore to Marquette Park, out west to Austin to the Northwest Side and West Rogers Park,” Dominic Pacyga, a Columbia College urbanologist, told the Tribune in 2000…

In 1997, a Tribune declared: “Bungalows Were Better Than A Place To Live. They Told The World Who You Were” over a story that declared the humble home to be “an idea, a symbol, a trophy, a style, an approach to life.”…

Chicago’s bungalow builders left that idea behind, while appropriating the concept that the middle class deserved homes with little artistic touches, like those the wealthy took for granted: leaded window glass, red or yellow brick with checkerboard patterns, bay fronts either octagonal, squared or rounded.

Three quick thoughts:

  1. This highlights the coming and going of residential architectural styles. This design emerged in a particular era, took off, and now has been replaced by other designs that address the wants of residents and builders and that also became symbols of joining the middle class. (See the suburban ranch home or the McMansion.)
  2. How exactly does a particular home style become a status symbol? The article hints at the role of developers (selling the image that goes with this particular home), politicians (promoting the style and protecting the homes in later decades), and residents. Could we add in famous cultural works that take place in or highlight or celebrate the bungalow? The role of zoning officials and historic preservationists?
  3. How many of these homes initially were owned by white residents of Chicago and how much has this changed over time? How much did bungalows contribute to long-standing patterns of residential segregation and differences in wealth among homeowners?

How homeowners and investors see home purchases differently

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What is buying a home about? It could depend who you are:

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Ordinary buyers and investors have different priorities when sizing up a house purchase. An owner-occupier will focus on whether they can afford the monthly mortgage payment, rather than obsessing over cap rates. They might be willing to overpay if the house is in a good location and is the right long-term fit for them or their family.

It can be frustrating for institutional investors when house hunters bid prices up to irrational levels in tight markets, as is happening today. But sky-high valuations have a silver lining for landlords. Oddly, family homes have turned out to be a great hedge against higher interest rates, as the lock-in effect of ultralow in-place mortgages has protected valuations. And now is a great time for landlords to prune their portfolios and sell properties at near-record prices. 

As the existing housing stock is so unaffordable, investors need to find other ways to grow their portfolios. Large players such as American Homes 4 Rent are building houses themselves, or buying newly constructed units directly from builders. This should be helpful for the undersupplied U.S. housing market.  

There is also a small pool of properties that can be picked up at prices that make sense to investors. According to real-estate investor Amherst, around $12 billion of two-to-four-bedroom homes are currently listed for sale at a 5.75% cap rate. These properties are cheaper because they need work. But it might be more lucrative to patch them up than to build new ones, given it currently costs $200 a square foot on average to build a house compared to $20 to $30 a square foot to renovate.

In the end, both sets of owners want to gain financially from their purpose. Investors want a return on their investment as do homeowners as they tend to expect the value of their property to increase in their time as owners.

But how they get to that return seems to differ. The homeowner will often live in the property in the meantime. As mentioned above, the financial return is not the only factor involved. For the big investor (the primary focus in the article as opposed to smaller investors), a property might be more of a data point among many other properties.

In both situations, it is worth asking how this emphasis on financial investment changes (1) the experiences of those living there and (2) communities. Owning a single-family home has long been part of the American Dream but the move to treating it more like a financial commodity does change matters.

Median home prices up 39% in four years

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How long can median home prices rapidly increase:

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The median U.S. home price is now $435,000, per NAR — up 39% since 2020 — while the average 30-year fixed mortgage rate has more than doubled to over 6% in that time

This is a quick jump in a short amount of time. Americans expect that housing values will go up over time – this is what can make it such a valuable investment – but can it keep going up this quickly?

Skepticism about this rise continuing at this rate could emphasize multiple unusual factors at play. A global pandemic. Interest rates shooting up. A quick turn toward working from home. A slow-down in housing construction, particularly for less expensive homes and starter homes. And housing prices do not always go up every year – they ten to over decades but not at every point.

On the other hand, why shouldn’t this rise continues? Where is a bunch of new housing going to come from? Will mortgage rates drop dramatically soon?

This statistic came from an article that primarily discusses how these rising prices mean many are priced out of the market. Those with resources already, particularly those with equity in a home, can better compete for the limited number of houses.

Whether values continue to increase or slow or even decline could go a long way toward affecting who can pursue the American Dream of homeownership.