Economic Perspective: Will Home Buying Rebound?

MARY WALDEN:

“Today’s program asks if home buying will rebound. Mike, the percent of households who own a home has been sliding for a decade. This goes against tradition where most people aspire to own, rather than rent. Is the decline in home owning part of a long term trend or is it temporary?”

MIKE WALDEN:

“Well that’s a really good question, and it’s one people in the real estate business, builders and developers have been asking. You could argue that the recent decline in home owning is a result of the Great Recession. When people’s view of housing completely changed. Housing, or owning a home, was always considered a no-brainer because you made money by owning a home. You didn’t throw your money, what’s called your rent money, down the drain.”

“However with housing prices crashing during the Great Recession, that changed that philosophy. But it may come back. Others however say that no it isn’t temporary, it is long term. We have slower household growth. We have a different attitude about how to live among the millennial generation. We have smaller household sizes. All of this, they argue, will cause the rate of homeownership to be lower.”

“Recent forecasts right now, and of course they are forecasts, say that the current level of homeownership is around 65 percent, but the forecasts suggest that in the next 20 years it may go down to as low as 50 percent. If that’s the case, that is a big game-changer in our economy. That is going to change a lot, not only in the geographical landscape, but how we go about our daily lives.”

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.