Just Released: Press Briefing on the Evolution and Future of Homeownership
The New York Fed today held a press briefing on homeownership in the United States, in connection with its release of the 2019 Survey of Consumer Expectations Housing Survey. The briefing opened with remarks from New York Fed President John Williams, who provided commentary on the macroeconomic outlook and summarized the prospects for homeownership. He noted that the labor market remains very strong and that there seems to be little evidence of inflationary pressures, meaning that the economy is on a healthy growth path.
The briefing continued with a presentation by Bank economists on how homeownership has evolved over the past fifty-plus years. After a long period—the thirty years between 1965 and 1994—of relatively minor fluctuations around 64 percent, the homeownership rate began an unprecedented 5 percentage point rise over the next decade, from 64 percent in 1995 to over 69 percent in 2004. This rise was driven primarily by a high rate of entry into homeownership, particularly among young people and first-time buyers, with the New York Fed’s Consumer Credit Panel data showing that transitions into ownership ran quite high through 2003. A low rate of exit from homeownership via foreclosure also contributed to the high net increases in ownership.
By 2007, however, both entry and exit were going in the opposite directions: first-time purchases declined and foreclosures began rising sharply as home prices fell and the recession began to take hold. This dynamic—high exits via foreclosure and low rates of transition into ownership—continued to reduce the homeownership rate for a decade, through mid-2016. By that point homeownership had fallen to 62 percent, well below the pre-boom level and matching the lowest rate recorded since at least the 1960s. Homeownership has subsequently bounced back, and the current rate of 64.2 percent is very close to the longer-run average.
The outlook for homeownership over the next decade will depend on several factors. The tight mortgage credit conditions of the last decade have produced a group of homeowners who are at comparatively low risk of default, so changes in the homeownership rate will likely be determined primarily by rates of entry into homeownership. Barring a change in the economy, the nation’s aging population will likely push up homeownership since older households are historically much more likely to own. Further, the majority of current renter households would rather own; nonetheless, tight credit and other constraints, including the high prevalence of student debt, mean that many of these same renters see it as unlikely that they will ever be able to enter into homeownership. How these factors—demographics, preferences, and constraints—play out over the next decade will determine where the homeownership rate lands.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
Olivier Armantier is an assistant vice president in the Federal Reserve Bank of New York’s Research Group.
Andrew Haughwout is a senior vice president in the Bank’s Research and Statistics Group.
Gizem Kosar is an economist in the Bank’s Research and Statistics Group.
Donghoon Lee is an officer in the Bank’s Research and Statistics Group.
Joelle Scally is a senior data strategist in the Bank's Research and Statistics Group.
Wilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.
How to cite this blog post:
Olivier Armantier, Andrew Haughwout, Gizem Kosar, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw, “Just Released: Press Briefing on the Evolution and Future of Homeownership,” Federal Reserve Bank of New York Liberty Street Economics (blog), May 22, 2019, https://libertystreeteconomics.newyorkfed.org/2019/05/just-released-press-briefing-on-the-evolution-and-future-of-homeownership.html.