Young-Adult Housing Demand Continues to Slide
Planning, Economic &
The Great Recession and housing bust hit young adults hard. The unemployment rate for 25-34 year-olds more than doubled between 2007 and 2010, and real median household income for this group fell by nearly 10 percent during the downturn. As economic conditions deteriorated, young-adult household formation and homeownership fell sharply. In recent years, however, young Americans’ economic circumstances have begun to brighten, with the unemployment rate for 25-34 year olds dropping and their income stabilizing.
This new edition of Housing Insights from Fannie Mae's Economic & Strategic Research Group analyzes data from the Census Bureau's newly released 2013 American Community Survey (ACS), which shows that two key metrics of housing demand – the headship rate1 and homeownership rate – continue to decline for young adults, despite their recent economic gains. However, the ACS data also bring some good news. In particular, the rate of housing cost burdens among young owner-occupants continues to plummet. In 2013, fewer than one in four young homeowners spent more than 30 percent of household income on housing expenses, a rate that is not only 13 percentage points below the 2007 peak, but also significantly lower than in 2000, prior to the mortgage credit bubble.
The continued slide in household formation and homeownership among young adults suggests that more robust labor market improvements, among other factors, are needed for young Americans to get a stronger foothold in the housing market. The large decline in homeowner affordability problems among young adults indicates that substantial housing market changes in the wake of the housing bust have created a generation of young homeowners who have housing costs that are much better aligned with incomes.
To learn more about these findings, read our latest Housing Insights.
1 The headship rate, a commonly used metric of household formation, is the proportion of the population in a given age group that is a householder, i.e., the person, or one of the persons, in whose name a housing unit is owned, being bought, or rented.
Director, Strategic Planning
Economic & Strategic Research Group
September 30, 2014
The author thanks Orawin Velz, Gerry Flood, and Doug Duncan for valuable comments in the creation of this commentary. Of course, all errors and omissions remain the responsibility of the author.
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