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Inaugural Fannie Mae Data Note Examines Falling Homeownership Rates

Doug Duncan Commentary ImageToday, Fannie Mae's Economics & Mortgage Market Analysis Group is launching a Data Note series that will examine the characteristics of key data sources and mine them for insights into recent market developments. Our first Data Note uses recently released decennial census data to examine the age dynamics of homeownership attainment and state patterns of housing tenure change over the last several decades. The Data Note finds that the overall homeownership rate declined by about a percentage point between 2000 and 2010, and that rates fell for all age groups. Declines for young and middle-age households were particularly striking (see chart below). Among households headed by people age 25 to 54, homeownership rates fell by 3.5 to 3.9 percentage points last decade. Only the elderly were spared large rate drops, with households age 65-74 experiencing a decline of 1.1 percentage points and those older than 74 experiencing virtually no change. Examining change over multiple decades reveals a stunning divergence in the homeownership fortunes of the young and old. Since 1980, rates for 25-34 year-olds and 35-44 year-olds have declined by nearly 10 percentage points, whereas the rate for elderly householders has increased by more than 7 points.

Last decade's homeownership rate declines were not only demographically pervasive, but they also were geographically widespread. The overall homeownership rate fell in all but 9 states and the District of Columbia. States in the southeast experienced relatively large declines, whereas most states in the northeast eked out small gains. For households headed by 25-44 year-olds, every state experienced a homeownership rate decline (the District of Columbia managed a gain) and southeastern states saw particularly sharp drops. North Carolina, South Carolina, Georgia, Florida, Alabama, and Mississippi recorded decreases ranging from 5.1 to 7.3 percentage points in this age group, compared with a decline of 4.3 points nationally.

Some homeownership retrenchment has likely been caused by ongoing social changes unrelated to the housing crisis. For example, longer educational careers and delayed marriage have helped to shift first-time home purchase to later in the life cycle, thus contributing to homeownership rate declines among the young over the last several decades. However, the results presented in this Data Note also suggest the significant tenure consequences of the housing crisis and highlight the importance of efforts to support struggling homeowners and ease the transition to renting in cases where homeownership is unsustainable. The results also indicate a growing need for rental housing. As we saw from a recent Fannie Mae National Housing Survey, providing adequate options for renters includes supporting single-family rentals. Stay tuned for a future Data Note that will continue our exploration of recent tenure shifts by examining the expanding role of single-family rentals.

Doug Duncan
Vice President and Chief Economist

October 10, 2011

Data Note Chart: Homeownership Rates Fell for All Age Groups Last Decade

Homeownership Rates Fell for All Age Groups Last Decade, With Young Hardest Hit

Source: U.S. Census Bureau, Decennial Census of Population and Housing.

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