Insight Highlights The home price-to-income ratio has increased substantially since 2000, depressing homeownership. The ratio has grown more for young adults than the overall population, and even more so for young adults living in metro areas. Around 700,000 young adults did not buy a home between 2000 and 2016 because of increases in inflation-adjusted home prices and rents. Homeownership rates for younger age groups fell steeply after the financial crisis, and this lag is likely to persist through 2025.
The homeownership rate for young adults (ages 25-34 in 2016) is due to rise as they age, but that increase varies. By 2025 Freddie Mac projects: – Under a baseline scenario, the homeownership rate of young adults rises to 58.1%. – Under an optimistic scenario, the homeownership rate could rise as high as 60.0%, by 1.9% more than the baseline. – In a pessimistic scenario, the homeownership rate only increases to 55.9%, by 2.2% less than baseline. – For those who will be 25-34 years old in 2025, the homeownership rate is forecast to be 36.6%.
Additional economic and demographic factors also impact homeownership rates among young adults, including: – Those self-employed are 5% more likely to become a homeowner than those who work for an employer. – Living in a metropolitan statistical area (MSA) where employment opportunities and amenities abound results in a 5% less chance of becoming a homeowner versus those living outside metro areas. – Those foreign-born are 11% less likely to become a homeowner, but the effect fades away as the number of years resided in the United States increases.
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