Generational Trends in Home Ownership:

An Era of Renters?

Glenn E. CrellinRunstad Center for Real Estate Studies

University of Washington

Realtor® University ForumMay 18, 2012

Acknowledgments

Principal Sponsor of this project Realtor® University Research Center

General Sponsors of WCRER/Runstad Center Research Washington Real Estate Commission Washington Realtors®

Recent Headlines

Homeownership May Be for the Few, not the Many USA Today, March 2011

American Dream, Downsized: Homeownership Not a Given McClatchey, September 2011

Renting Prosperity Wall Street Journal, May 5-6, 2012

Identifying Generations G.I. Generation

Born 1900-1924: Age 87+ Silent Generation

Born 1925-1945: Age 66-86 Baby Boom

Born 1946-1964: Age 47-65 Generation X/Baby Bust

Born 1965-1979: Age 32-46 Generation Y/Millennials/Echo Boom

Born 1980-2000: Age 11-31 Generation Z/Internet Generation

Born 2001-present

Age Distribution of Population

13%

28%

20%

26%

11%

2%

Z/InternetY/MillennialX/BustBoomSilentG.I.

Tenure by Age Group

G.I.

Silent

Boom

X/Bust

Y/Millennial

0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000

Own Rent

Tenure by Age Group

G.I.

Silent

Boom

X/Bust

Y/Millennial

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Own Rent

Household Formation: 1980-present

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Homeownership Rate by Age of Householder

1982 1992 2002 20110

10

20

30

40

50

60

70

80

90

<3535-4445-5455-6465+

%

Historical Context

Mankiw and Weil, Regional Science and Urban Economics, 1989 “The entry of the Baby Boom generation into its

house-buying years is found to be the major cause of the increase in real housing prices in the 1970s. Since the Baby Bust generation is now entering its house-buying years, housing demand will grow more slowly in the 1990s than in any time in the past 40 years. If the historical relation between housing demand and housing prices continues into the future, real housing prices will fall substantially over the next two decades.”

Recent Homeownership Rates

19821984

19861988

19901992

19941996

19982000

20022004

20062008

201030

35

40

45

50

55

60

65

70

75

All Under 35

%

Number of Homeowners by Age Group(1,000s)

<25 25-34 35-44 45-54 55-64 65-74 75-84 85+

1960 323.5 4,489.9 6,328.2 9,434.9 4,377.9

1970 548.2 4,817.2 7,337.2 12,584.3 6,129.1

1980 1,085.7 8,681.3 9,148.1 18,689.9 10,767.6

1990 862.2 9,000.4 13,503.0 10,773.9 9,864.1 9,071.9 5,949.3

2000 989.7 8,336.5 15,866.9 15,957.1 11,367.3 9,353.2 6,339.6 1,605.5

2010 869.6 7,547.4 13,255.6 17,804.1 16,502.7 10,834.0 6,789.0 2,383.6

GI Silent Boom X/Bust Y/Millennial

Homeownership Rate by Age Group(Percent)

<25 25-34 35-44 45-54 55-64 65-74 75-84 85+

1960 12.5 46.2 54.5 48.4 46.4

1970 13.8 45.6 66.1 69.9 61.4

1980 18.1 50.2 70.8 46.9 69.3

1990 17.1 45.3 66.2 75.3 79.7 78.8 70.4

2000 17.9 45.6 66.2 74.9 79.8 81.3 77.3 66.1

2010 16.1 42.0 62.3 71.5 77.3 80.2 77.9 66.2

GI Silent Boom X/Bust Y/Millennial

Homeownership Rates by Age Group(Percent)1982 1987 1992 1997 2002 2007 2011

1948-52 57.1 64.1 69.1 74.2 77.8 79.9 79.8

1953-57 38.6 53.5 61.4 69.7 74.9 76.9 77.3

1958-62 19.3 36.4 50.5 62.6 71.7 74.0 74.4

1963-67 16.0 33.6 52.6 65.2 70.4 71.0

1968-72 14.9 35.0 55.0 65.0 66.9

1973-77 17.7 39.0 54.4 59.8

1978-82 23.0 40.6 49.8

1983-87 24.8 34.6

1988+ 22.6

Boom Bust Millennial

WSU Student Survey: When Plan to Purchase Home

10%

48%

24%

7%

7%4%

1-2 yrs3-5 yes6-10 yrs11-15 yrs>15 yrsNever

WSU Survey: Impact of Bubble/Collapse

%Much more likely to purchase 6.9More likely to purchase 34.5No change in likelihood of purchase 13.8Less likely to purchase 13.8Much less likely to purchase 3.4

Conclusion

“Gen Y will absorb an even greater number of owner-occupied and detached housing units. Indeed, if they attain 2020 ownership rates similar to households of the same ages in 2010 (which are much lower than those in 2000), they will absorb nearly 13 million owner-occupied units during the decade, or 2.5 million more than were absorbed by households of the same ages during the 2000s.” Bitter and Krause, 2012