George W. Bush once said, "We want everybody in America to own their own home...this is an ownership society." But US home ownership has now hit a 20 year low, largely due to millennials opting out of the house buying culture that has come to define America. Reports the Huffington Post:
According to the USCB, home ownership dropped to a 20-year low of 64.5% in 2014, having been on a continual decline since 2004, when the rate stood at 69 percent. The last time the rate of home ownership dropped below 64 percent was in 1990. Given the past 10-year trend, there is every reason to believe that the decline will continue. 2015 could see that figure dip below 64 percent for the first time in 25 years.
There are a myriad of reasons as to why this is happening - there are lower employment rates for recent graduates, a rising rate of 'underemployment', and high downpayment costs in certain parts of the country. But there is one overarching theme behind millennials rejecting house buying as the sole purpose of their existence.
Market Watch has an interesting article based on research done by Carrington Mortgage Services, a Santa Ana, CA based mortgage lender, detailing why millennials around the country are opting out of homeownership. The precise reasons vary: millennials are more concerned with down-payment costs in the West, while student loan debt is the biggest concern of borrowers in the upper Midwest. Growing student loan debt and credit card debt is the biggest worry amongst Midwestern millennials, and Southerners are worried about bad credit scores due to excessive credit card debt.
Despite the variations, the common theme is that of the rejection of debt as a way of life for young Americans. They are no longer interested in being tied down to a physical property that requires years of work to own and are refusing to be metaphorically 'owned' themselves.
The concept of home ownership has been promoted relentlessly by the political classes, who are of course beholden to the banking industry which has a huge vested interest in getting everyone on the property ladder. These ideals are, as Adam Posen in the Financial Times argues "fundamentally regressive":
It [the promotion of home ownership] perpetuates inherited wealth and subsidies of middle-class children. The accumulation of housing wealth benefits those simply lucky enough to have had grandparents who were homeowners. Any policies to promote younger people “getting on the property ladder” will disproportionately benefit those fortunate children who have been given savings, have parental co-signers and can show stable prior residency. They come at the cost of spending that money elsewhere, say on housing credits for the poor. They also perpetuate an influential lobby to protect mortgage debt and housing assets from taxes, whether while living in the asset or passing it on to family members. Like all favouritism to the children of the relatively rich, this discourages the development of new talent and competition, and thus is economically harmful.
Of course the banks have been betting that the lure of home ownership will override any concerns about societal inequality or long term debt, but millennials seems to finally be catching on.