Cheryl Russell is a professional demographer. Her job, which she does well, is to notice certain trend lines in statistical data. I became familiar with her and her blog, "DemoMemo: Demographic Trends with Attitude," when someone forwarded me one of her March blogs with the headline, "Steep Decline In Homebuying Among Young."
That’s the kind of trend lines that catch my attention — especially when I had seen nothing else about that subject from the traditional housing or census reports. I gave Russell a call, but before asking her about that particular blog, I was curious how one gets to be a professional demographer.
It wasn’t all that difficult. She went to Cornell University, where she earned her master’s degree in demography — who knew there was such a curriculum? Soon afterward, she became editor of American Demographics. I missed that one also; gee, I need to get out more.
Then she moved to the Boomer Report. For the last 20 years she has been working for New Strategist publications, which she tells me produces demographic reference tools.
If you think this kind of work is boring, well, I won’t argue. However, some of her blog posts fascinate me, even when they are just numbers. Recent subjects include: "Who Goes To The Movies," "The Mystery of Travel Statistics," "A New Baby Bust," and "The Boomer Inheritance."
Sometimes her blog posts are as short as one line. The post, "Little Savings," reads en toto, "percentage of workers who have saved $100,000 or more: 24 percent."
Russell began April with a blog post called, "The Housing Market’s Problem," and I’ll reprint it here in its one paragraph entirety.
"Yes, the unemployment rate is falling. Slowly. This morning the Bureau of Labor Statistics reported that the unemployment rate declined to 8.8 percent in March, down from 8.9 percent in February. We may be on the road to recovery, but our progress is blocked by what has been destroyed: confidence. The average American worker feels much less secure in his job than he did a few years ago. The percentage who think there is no chance they could lose their job in the next year, as shown in the post below, fell from 71 to 52 percent between 2000 and 2010, according to the General Social Survey. This insecurity might be good news for businesses that want to hold down wages. But it is a disaster for the housing market. With the threat of unemployment looming over them, how many will be brave enough to buy a house? Apparently, not many."
Good stuff, right?
So, that takes me to the blog post that caught my eye. Homebuilders, take note.
According to Russell, young adults are more hesitant to buy a home today than at any time in the past quarter century.
When I told Russell I hadn’t read anything on this subject before, she told me that was because she dissected the existing data differently, looking at homeownership in five-year age groups.
"If you look at these groups, you can see that the 30- to 34-year-olds had the biggest decline in homeownership rates since the market for ownership peaked in 2004," Russell said. "And that was a 5.8 percent decline. That got me interested in what has happened in that age group because this is a critical group for the housing market –this is the first group where homeownership rises above the 50 percent level."
To see what happened with 30- to 34-year-olds, Russell turned back to the prior grouping, the 25- to 29-year-olds, to see how their ownership changed from 2005-10.
"Homeownership in that age group increased because as people age they are more likely to become homeowners," said Russell. "But the increase was so much less than it had been in the previous comparable five-year periods that it became clear the 25- to 29-year-olds were becoming much more cautious about buying homes relative to that age group 10 or 20 years ago."
Here’s the key statistic, as I saw it: If you look at 25- to 29-year-olds as they move into the 30- to 34-year-old age bracket, from 2005-10 their homeownership rate increased 10.7 percent, which compares extremely unfavorably with the 20.2 percent increase a decade earlier for that same age group. Going back two decades, for that same cohort, there was a 14.1 percent increase in the homeownership rate.
If Russell is correct, the enthusiasm for homebuying in that age group is much less than it has been in the prior two decades.
Here’s something else Russell points out: The median age of homeowners in new homes (a structure built in the past four years) is 40. That compares to the median age of 52 for all homeowners. In fact, the under-40 age group is half of all owners of new homes, which is why a dampening enthusiasm for homeownership should be a bit frightening for builders.
"Developers and homebuilders are looking at a very different environment than they have ever experienced in their careers," said Russell. "It’s going to be an environment that may be with them for the rest of their careers, so they have to learn how to function in this new, more cautious environment."
For the 30- to 34-year-old group, homeownership remains at 51.6 percent, which means more people in that age group would still prefer to own rather than rent.
Since the Census Bureau has been tracking this information starting in the early 1980s, homeownership in this age group has never fallen below 50 percent. If it does, that would be, as Russell noted, a very big deal, "because it would be very clear to everyone that this important age group is not buying homes."