There’s no question that fewer people are buying homes today than they did over the past few decades. The Census Bureau released a preliminary national Q2 2016 homeownership rate — 62.9 percent, the lowest recorded since 1965.
But the real estate industry is still piecing together the “why” of this trend.
Academic researchers, economists and real estate experts alike have been trying to pinpoint the cause, and there has been a particular focus on millennials.
This demographic was expected to bolster rates but hasn’t due to exorbitant student loans and low salaries.
But, Trulia’s newest study, “Family Tradition,” suggests that we look at millennials’ parents to find the source of the homeownership decline.
According to the study, homeownership is strongly influenced by family. So much so that children of parents who owned a home are three times more likely to own as they reach adulthood.
This trend strengthens as children get older and make more money (a 40-year-old who makes $100,000 and grew up in a home owned by their parents has a 79 percent chance of becoming an owner).
But, as Trulia notes, this trend reveals a new factor that makes what’s happening to millennials much clearer.
Compared to Gen Xers, millennials are less likely than people of other age groups to have grown up in a home owned by their parents.
“This suggests that millennials could be less likely to own a home when they reach prime homebuying age even before considering student debt burdens and lower wages for those who hit the labor market during the recession,” says the study.
In addition to homeownership rates, the study found that parents also influence their children in other ways:
- Among people of the same age and household income, those that were raised in homes that their parents owned are 2.9 times more likely to own themselves as those that were raised in homes that their parents rented, after excluding anyone who received financial help from their parents.
- If you’re 27, don’t still live with your parents, and live in a lower- to middle-income household, the chances you own your home are greater (25.8 percent versus 10.7 percent) than your counterparts who grew up in a rented home.
- Among those that grew up mostly in owned homes, 58.3 percent have received some kind of financial assistance from their parents compared to just 32.3 percent for those who grew up in primarily in rentals. More than one out of 10 adults, 11.4 percent, whose parents owned have received assistance from them with a down payment while just 2.6 percent who grew up in rental housing got down payment assistance.
- 53.1 percent of millennials (ages 19 through 34) grew up in owned households, compared with 58.9 percent of those aged 35 through 45.
Although real estate professionals are hoping homeownership rates will rebound — especially for millennials — the study says the industry should prepare for the reality that current rates could become the new normal.