U.S. Homeownership Expected to Rise for the Young

The “American Dream” could be on the verge of a rebound for some. The home ownership rate for young Americans will probably increase over the next decade to close to 60% from below 40% in 2016 as their incomes increase and they start families, according to Freddie Mac estimates. The data track two cohorts: Americans who were between the ages of 25-34 in 2016 and those who will be in that age group in 2025.

The home ownership rate of young adults will probably rise to 58.1% in 2025. Under a more optimistic scenario, the ownership rate could rise as high as 60%; in a pessimistic scenario, 55.9%. A percentage point can translate to more than 500,000 more home purchases. The self-employed are 5% more likely to own a home. Higher levels of wealth are correlated with being self-employed.

There’s a 5% less chance of affording a home in a metro area versus elsewhere. An estimated 700,000 young adults refrained from buying a home between 2000 and 2016 because costs outpaced incomes.“Historically low mortgage rates and increasingly favorable employment conditions should have generated a far greater number of home purchases by young adults, especially in the last five years,” said Sam Khater, Freddie Mac’s chief economist.

“Unfortunately, home-price and rent growth above incomes — driven primarily by a severe shortage of housing supply — have been too high of a hurdle for many would-be buyers to clear.”