The latest homeownership rate figures show an interesting dichotomy to the housing market. While prices are up, the homeownership rate is down. And down significantly. The homeownership rate is now at levels last seen 50 years ago (the latest figures are the lowest in a generation – each update seems to bring a new low). This flies in the face of all the house humping that is being pushed out into the market. What we do know is that Millennials are simply not buying numbers in any “pent up demand” form. In fact, a record number of Millennials are living at home with at least one parent. The data is interesting since the drive is being pushed by older Millennials, those that should be buying. Younger Millennials are likely in college accumulating back breaking levels of debt. There has been research showing that student debt is a hindrance to buying a home. So are we simply creating a new generation of boomerang kids?

The homeownership rate at another low

I know it bugs some people but the reality is, the homeownership rate is now at a 50 year record low. This flies in the face of the thesis that this move up in housing values is coming from some economic miracle. The volume of home sales is tepid at best and weak for new homes. What you have is the after effects of a manipulated market. But people are waking up to the game and you see this in our very unique political season.

Here is the clear indication of where homeownership is going:

It seems like we will have three classes of people in this market:

First, those that can buy and will buy

Second, those that can rent and will rent

Third, those that can’t buy or rent and will live at home

That third category is where many Millennials are falling. Take a look at the latest data:

Does that look like pent up demand? And this trend started in the early 2000s thanks to financial products that turned the entire housing market into a casino. This big change has created a system where it is hard to determine where the new normal is. Taco Tuesday baby boomers are now griping that their kids can’t buy a home in the area they live in. And many are having grown adults living at home making lower wages and carrying large levels of student debt.

You can see this clearly when we break out the Millennials by age:

As it turns out, the big push is coming from older Millennials. This makes sense in the context that never in our history have we had so many people going to college as a percent of the population. College students for the most part are renters and living away from home. But once the college experience is over, millions are finding their way back home at an age range that was prime for home buying.

It will be telling if this continue. What is certain is that this likely will encourage higher rents if the economy grows or even maintains. But rents also react quickly to economic downturns in the form of vacancies. These Millennials will likely move out into a rental before buying. The 10,000,000 new renter households over the last decade gives good evidence to this transition.

If this was true pent up demand, they would have been buying since 2009 (the recession officially ended 7 full years ago). Yet the house humping continues and in Los Angeles, the homeownership rate is even lower with the majority of people being renters. It is not even close:

53.6 percent of L.A. County households rent. Back in 2010 it was only 51.8 percent. So the trend to renting and living at home is happening and Millennials are a big part of this change.

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