Are More Declines in Homeownership to Come?

DSNews.com, November 23rd, 2016

Freddie Mac BHA massive question among those in the mortgage industry is whether homeownership will increase or decline in the near future. But a recent report from Sean Becketti, VP and Chief Economist for Freddie Mac, examines what some of these experts anticipate for the next several decades – and what they are seeing are further declines.

“Experts at the Joint Center for Housing Studies at Harvard and at the Urban Institute project further declines in the homeownership rate in the next few decades,” says Becketti. “According to these projections, homeownership rates below 60 percent are possible within 20 years.”

Becketti says that though the two organizations use different approaches to reach this conclusion, both are based on similar metrics including “the typical homeownership rate of different age groups and different demographic” and “Census projections of changes in the population in each of these groups.”

“For instance, there is a strong relationship between homeownership and age,” says Becketti. “The homeownership rate is very low for people younger than 25. The rate rises rapidly through the mid-30s, then continues to rise more gradually, peaking in the early 70s. This relationship suggests that the national homeownership rate will start to decline as the Baby Boomers begin to leave the stage and the population of the U.S. becomes younger on average.”

Of course, this projection does not factor in unanticipated economic catalysts that could influence the housing market one way or another, according to the report.

“The experts project future homeownership rates by applying their arithmetic to current conditions and Census population projections,” says Becketti. “This approach does not—nor does it claim to—incorporate future macroeconomic disruptions, significant policy changes, or shifts in social attitudes in their calculations. And these types of influences ultimately will determine how accurate or off-target the expert projections are.”

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