Owning a home. Still the American dream?
Housing prices and interest rates are at historic lows, but people still aren’t buying homes. This is especially true of young people.
Is the stagnant housing market simply a symptom of the struggling economy, or is it possible that it is the result of a shift in cultural values among a younger generation who no longer view home ownership as part of the American dream?
The Standard & Poor’s Case-Shiller seasonally adjusted housing index for 20 cities dropped again in November 2011, the last month for which data is available, falling to the lowest levels since 2003.
The index fell 1.3 percent from October to November and 3.7 percent from November 2010. According to the index, U.S. home prices are back to their mid-2003 levels, down 32.9 percent from their peak, in July 2006.
“I think some of these young people, after witnessing the strategic defaults and foreclosures of recent years are not looking at residential real estate as a place where they can get a return on equity,” said Denise Daniele Akason, Associate Director of the Real Estate program at Northwestern’s Kellogg School of Management. “They may be choosing to invest elsewhere. They also may be choosing to rent longer and will eventually buy when markets recover.”
But can something be said for the changing attitudes and social norms of the Millennial generation?
According to data from a 2010 Pew Research Center study, only 20 percent of Millennials (those born during the 1980s and early 1990s) say owning their own home is one of the most important things to them. The same research shows that roughly a quarter of Millennials (23 percent) say they are currently married, compared with 59 percent of Gen Xers (those born between the early 1960s and early 1980s) and 64 percent of Boomers ( those born between the late 1940s and early 1960s). In general, the research finds that young people are less likely to be married now than was the case 20 years ago.
Although only about a third of Millennials (34 percent) have children, they are just as likely as their
older counterparts to place high value on good parenting. About half (52 percent) said being a good parent is one of the most important things to them. This compares with 50 percent of those ages 30 and older, according to Pew.
Could the fact that fewer young people are marrying and having children play a role in the hurting housing market?
“I think mansions are an endangered species,” Bothen said.
“Each semester, early on, after we talk about the housing crisis and the financial crisis, I ask my students to do a short paper on their views about buying a home. These are people in their early twenties, and over ninety percent of them still want to buy a home,” said Thomas Bothen, Associate Director at the University of Chicago Illinois Center for Urban Real Estate. “What’s preventing them from doing that is some uncertainty about the economy, the security of their jobs or getting a job.”
According to Pew, households headed by adults younger than 35 had less housing wealth in 2009 than did households headed by younger adults in 1984. These household heads are slightly less likely to be homeowners (38 percent in 2009 versus 40 percent in 1984), and home equity plays a smaller role in their overall wealth (31% in 2009 versus 46% in 1984).
“I think mansions are an endangered species,” Bothen said. “I think the preference now is for smaller homes. Environmental and energy sustainability is a factor for the younger homebuyer. I don’t think there is a cultural shift though. The students that I teach still want to own a home at some point. There are economic barriers to overcome, though.”