It's Not Just Millennials Who Aren't Buying Homes

You may have heard some buzz recently about first-time home buyers, with millennials sitting on the sidelines instead of jumping into the housing market.

Well, it’s not just them. Basically, Americans in every age group under 65 are showing historic reluctance to own homes, according to an email from Ellyn Terry, an economic policy analysis specialist at the Federal Reserve Bank of Atlanta.

First-timers represent only 30% of the market, when they should be more like 40% — historically, the long-term average, according to the National Association of Realtors.

And just last week, Credit.com reported on a survey that found young buyers want to skip the starter home and wait for their dream home.

Why? Terry speculates that high debt, high cost, as well as shifts to a more urban society and shifts away from the desire to own homes are just a few of the reasons. But those factors are hardly limited to young people.

“To the extent that these factors are true [for Millennials], they may be affecting the decisions of other generations as well,” she wrote in a recent post titled “It’s Not Just Millennials Who Aren’t Buying Homes.”

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First off, homeownership rates for all Americans — young or old — have fallen since the housing peak of 2005. That makes sense; most weren’t spared by the housing bust.

It’s surprising to learn that homeownership rates fell even harder among older Americans, however.

“Homeownership among young Generation Xers has fallen by a bit more than the millennial generation since the housing peak — declining 11 percentage points since 2005 compared with a decline of 9 percentage points for those under 35-years-old,” Terry wrote.

Historical context is critical, however. Homeownership rates in the last decade were artificially elevated because of the housing bubble, so it’s worth comparing them to levels before the boom. By some measures, the overall homeownership rate — at around 64% now — stands at roughly what it was in the mid-1980s and ’90s, before the factors that started the boom were set in place.

That hardly tells the whole story, however. Ownership rates for every under-65 age group — under 35, 35-44, 45-54, and 55-64 — have fallen to below even their mid-1980s rate. So why is the overall rate flat?

You can see what’s going on in the chart below — the rate of older owners is higher than the mid-80s, while the rate among all other groups is lower.

Chart: Federal Reserve Bank of Atlanta

In a different study, financial adviser Joshua Brown cites Bank of America research claiming the effect is even more dramatic for much older Americans. Among the 75+ crowd, homeownership rates soared from 73.6% in 1994 to 78.6% in 2014 — a span during which the rate fell for everyone between the ages of 25 and 65.

In some ways, this makes sense: Americans are living longer, and staying in their own homes longer. That means a bump in the total number of older Americans, “an age group that always has higher homeownership rates,” according to Terry, is skewing the statistics. But it’s also another sign that the underlying fundamentals of America’s housing market remain shaky.

No matter your age bracket, if you’re looking to buy a home, it’s a good idea to review your credit before you apply for a mortgage. Having a good credit score can help you qualify for better terms and rates on the mortgage. (You can see where your credit currently stands by reviewing your free annual credit report summary, updated every 14 days, on Credit.com.) If you aren’t happy with your current credit situation, you can try to improve your credit scores by disputing any errors on your credit reports, limiting new credit inquiries and paying down credit card debt.

[Offer: Your credit score may be low due to credit errors. If that’s the case, you can tackle your credit reports to improve your credit score with help from Lexington Law. Learn more about them here.