The State of Homeownership in the US: Issues and Solutions
The current state of homeownership in the US raises many questions. While the overall rate has remained stable, demographic shifts and economic factors suggest deeper issues. The disparity between those benefiting from low interest rates and appreciating assets and those struggling with high interest rates, debt, and stagnant wages is growing. This divide affects not only individuals but also the broader economy and social structure. Addressing these challenges involves looking at supply issues, developmental barriers, and the role of institutional investors, with potential solutions ranging from increasing home construction to revising zoning laws and promoting first-time homeownership.
Is There Really a Homeownership Crisis in the US?
HousingWire recently asked, “Do we really have a homeownership crisis in this country?” US homeownership rates are somewhat in the middle compared to other wealthy countries worldwide. Additionally, homeownership rates have remained relatively stable over the past 50 years, staying in the mid-60% range. Many are questioning if there truly is a homeownership crisis in the US. As the saying goes, you can use statistics to support any argument, and that seems to be the case here.
Homeownership rates are currently measured by dividing owning households by total households. It would be more accurate to measure the number of owning individuals divided by the total population. The traditional measurement doesn't account for young adults moving back in with their parents. The number of 25 to 34-year-olds living with their parents has more than doubled in the past 60 years, which is where the decline in homeownership rates is occurring. This becomes clear when using the new measurement, which considers individuals instead of households.
Financial Divide: The Best and Worst Times for Homebuyers
Charles Dickens once said, “It was the best of times, it was the worst of times.” This reflects our current financial situation in the country. For many with appreciating assets, record stock prices, and interest rates locked into the high 2% and low 3% range, it’s the best of times financially.
If you're a young person without assets, you face higher interest rates, around 7%, when buying your first home. Credit card debt and student loan debt are rising, and wage growth isn't keeping up with inflation. This makes it the worst time financially for young people, causing many to move back in with their parents, contributing to the overall homeownership decline.
Why Homeownership Matters: The Impact on Society and Economy
You might be thinking, “Hey, I'm financially secure and in a good situation.” In reality, this issue affects everyone. Our economy, including social security and national security, relies on demographics. If the next generation struggles to move out of their parents' homes, get married, and have children, it will negatively impact all of us across the US.
Many so-called experts tout the benefits of a nomadic renter lifestyle, but it’s bad for society. Homeowners typically have more civic pride in their communities and build their net worth through homeownership. A strong middle class benefits everyone in society.
Solving the Homeownership Crisis
How do we solve this big challenge of declining homeownership levels? Well, number one is fixing or really eliminating the Fed, which is a great place to start. That’s a topic for another video because the Fed has done significant economic damage to our country. But again, that’s a whole video in itself.
Moving on to the next point: fixing the supply issue. We have about a 6 million home deficit across the country. To address this, we need to build more homes. Builders are doing their best to stay in business and keep inventory moving, often resorting to costly rate buydowns that cut into their margins. If they must continue this practice, production may slow down. We need to offer incentives to keep builders active and increase production to reduce the 6 million home deficit.
For developers, removing developmental barriers is crucial for faster community development and increased building activity. Reducing environmental impact fees and other costs associated with building homes before breaking ground will be a significant help, especially in larger cities.
Additionally, offering a tax credit to investors to sell their properties can help increase supply. Many mom-and-pop and large institutional investors have portfolios of homes. Getting a percentage of these homes back on the market will help. We should also limit the purchases of large institutional investors, as they are buying hundreds or even thousands of homes, impacting first-time homebuyers, millennials, and the younger generation. Favoring first-time homebuyers will restore civic pride and help them build wealth through homeownership.
Another area to consider is accessory dwelling units (ADUs) in some subdivisions to allow for additional density. I've already done a video on this for Huntsville. While it may not be necessary yet in Huntsville, it could be in the coming years. We should also look at zoning across the US to allow for more affordable housing options and increased density. For example, tiny homes or two-bedroom homes can help increase density and homeownership.
Posted by Matt Curtis on
Send Us A Message