In a 2014 issue of the Federal Reserve Bank of St. Louis’ In the Balance, Senior Economic Adviser William Emmons and Policy Analyst Bryan Noeth, both of the St. Louis Fed’s Center for Household Financial Stability, examined why young families (defined as those with a head of household younger than 40) have lagged their older counterparts during the economic recovery. They found that young families have recovered only about one-third of the wealth they lost during the recession, while middle-aged and older families have nearly recovered to precrisis levels. Emmons and Noeth concluded that one of the most significant reasons involved declining homeownership among younger families. Those declining levels may not rebound quickly, if at all, they noted.
The U.S. homeownership rate has been declining for nearly a decade. It peaked at 69 percent in 2004, but has fallen nine consecutive years, reaching 65.1 percent in 2013.1
To be sure, they noted that young families aren’t the only ones retreating from homeownership. The homeownership rate for middle-aged families (those with a head of household between 40 and 61 years old) has dropped from 76.9 percent in 2005 to 72.1 percent in 2013. However, this decrease is notably smaller than the nearly 8 percentage point drop (50.1 percent to 42.2 percent) experienced by young families over the same period. The homeownership rate of older families (those headed by someone 62 or older) actually increased by almost a full percentage point.
Table 1 displays movements in age-specific homeownership rates by various birth-year cohorts reported by the Census Bureau at five points during the past 20 years (1993, 1998, 2003, 2008 and 2013). Reading down any column shows that homeownership rates generally increased for a given cohort as they aged. For example, the column regarding family heads born in 1964-68 shows that about 34 percent of these families owned homes when the head was age 25-29. By the time these heads of household were age 40-44, 69.4 percent owned a home.
Reading across each row shows declines related to the housing crash for given age groups. For example, the homeownership rates for families headed by someone age 35-39 rose from 60.5 percent to 65.1 percent over the first three observations (which would be in 1993, 1998 and 2003). However, the percentage fell over the next two observations to 64.6 percent (2008), then 55.4 percent (2013).
The table also includes the average homeownership rates for each age group for the period 2004 through 2006, when the housing boom and homeownership rate reached their peaks. Subtracting the 2004-06 rates from the annual observations shows that families headed by someone between the ages of 24 and 38 experienced the largest declines in homeownership rates from peak levels for their stage in the life cycle. Middle-aged families had notable declines as well, though the declines were less steep than those for young families. Older families experienced much smaller declines or even increases.
Emmons and Noeth wrote that the declines among young and middle-aged families were continuing as of 2013 but that it was reasonable to expect them to eventually level off. However, a leveling off of homeownership rate declines obviously means a lower overall rate than what was experienced during the 2004-06 peak. Emmons and Noeth noted that this “likely represented unusual conditions in housing and mortgage markets that we will never see again. Thus, it appears unlikely that the overall homeownership rate will return to its peak level any time soon, if ever.”
TABLE 1
| Age of Family Head at Time of Observation | 2004–2006 Average Rate (%) | Year of Birth of Family Head | ||||||
|---|---|---|---|---|---|---|---|---|
| 1924– 1928 |
1929– 1933 |
1934– 1938 |
1939– 1943 |
1944– 1948 |
1949– 1953 |
1954– 1958 |
||
| Under 25 | 25.2 | |||||||
| 25–29 | 41.0 | |||||||
| 30–34 | 56.7 | |||||||
| 35–39 | 66.4 | 60.5 | ||||||
| 40–44 | 71.6 | 67.8 | 70.1 | |||||
| 45–49 | 75.4 | 73.8 | 73.9 | 75.5 | ||||
| 50–54 | 78.1 | 76.7 | 77.8 | 78.0 | 76.5 | |||
| 55–59 | 80.7 | 78.1 | 79.8 | 80.9 | 79.4 | 75.7 | ||
| 60–64 | 81.9 | 79.9 | 82.2 | 82.0 | 80.9 | 77.8 | ||
| 65–69 | 82.8 | 80.2 | 81.9 | 82.6 | 81.6 | 80.4 | ||
| 70–74 | 83.1 | 82.2 | 82.1 | 81.7 | 82.8 | |||
| 75 and older | 78.8 | 78.7 | 78.6 | 79.8 | ||||
| Age of Family Head at Time of Observation | 2004–2006 Average Rate (%) | Year of Birth of Family Head | ||||||
|---|---|---|---|---|---|---|---|---|
| 1959– 1963 |
1964– 1968 |
1969– 1973 |
1974– 1978 |
1979– 1983 |
1984– 1988 |
1989– 1993 |
||
| Under 25 | 25.2 | 14.0 | 18.2 | 22.8 | 23.6 | 21.8 | ||
| 25–29 | 41.0 | 34.0 | 36.2 | 39.8 | 40.0 | 34.5 | ||
| 30–34 | 56.7 | 50.0 | 53.6 | 56.5 | 53.5 | 48.4 | ||
| 35–39 | 66.4 | 63.7 | 65.1 | 64.6 | 55.4 | |||
| 40–44 | 71.6 | 71.3 | 69.4 | 64.3 | ||||
| 45–49 | 75.4 | 73.6 | 69.6 | |||||
| 50–54 | 78.1 | 72.8 | ||||||
| 55–59 | 80.7 | |||||||
| 60–64 | 81.9 | |||||||
| 65–69 | 82.8 | |||||||
| 70–74 | 83.1 | |||||||
| 75 and older | 78.8 | |||||||
SOURCE: U.S. Census Bureau’s Current Population Survey.
NOTE: The observations for a given five-year birth cohort were in the years 1993, 1998, 2003, 2008 and 2013. The homeownership rates for 1993 have been estimated based on data and trends reported for 1994-97.
