Here’s What’s Killing the American Dream:And it’s dragging down the economy.
by Wolf Richter
WolfStreet.com
April 10, 2015
First-time homebuyers, the bedrock of a healthy sustainable housing market, are still largely missing in action. In February, they accounted for 29% of all homebuyers. But in the long-term data going back to 1981, according to the NAR, first-time buyers accounted for 40% of all purchases. And that’s a problem for the economy.
We know what happened to home sales: The largest PE firms, armed with the Fed’s free money started moving into the housing market in late 2011, eventually buying up hundreds of thousands of vacant homes that they then tried to rent out, thus becoming America’s largest landlords. Smaller investors also jumped into the fray. Under this buying pressure, home prices have soared, even as homeownership rates have plunged at record pace to the lowest level since 1994.
Homeownership rates have plunged the most among younger age groups that account for most of the first-time buyers (whose median age is 31). Last year, in the age group under 35, the homeownership rate dropped 1.5 percentage points to 35.4%. In the age group 35-44, it dropped a phenomenal 2.1 percentage points to 58.8%! [Read… The American Dream Dissipates at Record Pace].
First-time buyers are stuck in the tough reality of the main-street economy. Their real incomes have stagnated. If they aren’t in the top 25%, their real incomes have declined. Rents have gone up, and in some cities, like San Francisco, they have skyrocketed, making it impossible to save for a down payment. Student loans aren’t helping. And many millennials don’t want to live out in the boonies where housing might be cheaper, but commutes long and expensive. They like living close to the city center.
The Rest…HERE
