Homeownership makes many positive social contributions, but the most important may be that it is the predominant way families build wealth. Four years ago, the national homeownership rate hit a 40-year low, lower than it was during the depths of the Great Recession. In the second quarter of 2020, the homeownership rate hit 68.1%, the highest it had been since 2004, amid the housing boom that preceded the Great Recession. What happened to bring about this dramatic turnaround?
The answer is simple: the pandemic.
Like almost every other economic activity, home sales plummeted when most of America locked down in March. The pandemic hit just as the traditional spring home sales season opened in northern markets across the nation. However, millions of buyers were ready to house hunt, and they weren’t going to let the pandemic interfere. Within a few weeks, they figured out how to navigate the new challenges of buying a home safely, utilizing virtual house tours and e-closings. By May, home sales exceeded May 2019. By June, home sales were soaring.
Homeownership rates for all demographic groups increased in the second quarter, but homeownership for millennials and African Americans increased more than any other group. The rate for millennials (homeowners under 35) rose by 3.3 percentage points to 40.6%, the highest it has been since the fourth quarter of 2009, and the most significant single-quarter increase in 25 years or more.
For African Americans, the second quarter data was even more dramatic. Homeownership increased by 3 points over the first quarter and 6.4 points higher than the second quarter of 2019. The 6.4 points year-over-year increase amounted to an increase of 15.5%, more than any single-quarter increase for African Americans in 25 years or more.
Millennials are Finally Coming Home
The oldest millennials turn 40 this year. The sheer size of the millennial generation created expectations that it’s coming of age would give a much-needed boost to housing markets still recovering from the Great Recession. In reality, millennials entering the workforce in the wake of the recession trailed previous generations in career advancement and income.
Though most hoped to become homeowners, many millennials were saddled with student loan debt and lived with their parents to save money. By 2016, homeownership rates for Americans under 35 fell lower than they were during the housing crash that flooded the market with foreclosures in 2010 and 2011. In a 2018 analysis, the Urban Institute found that millennials are more likely to delay marriage and childbearing, steps that lead to homeownership.
A January 2018 survey of millennials who are still renting found that nearly nine in ten wanted to buy a home, and 45% expected to do so within three years, or by the end of 2020. Indeed, so many young buyers purchased a home last year that real estate agents called 2019 “the year of the millennial.” Millennials comprised 38% of homebuyers in the year that ended July 2019, up from 32% in 2015, according to the National Association of Realtors.
This year, not even the pandemic’s rising prices could slow millennial buyers. Low-interest rates and a desire for more space as the coronavirus pandemic forces people to spend more time at home are boosting demand for homeownership among Americans of all ages. Many millennials have additional motivations, especially parents of young or growing families, wrote the Wall Street Journal’s Nicole Friedman.