Housing Crisis Made Young People Less Confident In Homeownership: Study

The housing crisis has made young people less confident in the idea of homeownership, while its had the opposite effect on older Americans, a new study finds.

Americans aged 58 or younger, who experienced a loss as a result of the housing crash first- or second-hand, are relatively less confident in homeownership than those who did not experience the crash directly, a study from the Boston Federal Reserve finds. For Americans older than 58, the opposite holds true: those who were personally affected by the crash were more likely to have confidence in the idea of homeownership.

Watching a relative lose a home or watching the housing crash unfold across the country may make young people more cautious homebuyers when they do ultimately decide to buy a house, said Anika Khan, an economist at Wells Fargo Securities.

"There's a psychology that has been put in their minds about homeownership because they have seen the recent declines," Khan said. "Once they become older i think that they wont necessarily be apathetic towards homeownership but they'll be more prudent buyers."

If young buyers do eventually get over their fears and enter the market, their experience will likely push them to opt for smaller homes, Khan said.

"They will likely be a generation who is more cost-conscious and will try to live within their means and will actually not bite off more house than they can chew," Khan said.

Even with interest rates and near record-lows and an overhang of foreclosures dragging down prices, buyers are still hesitant to get into the market. The housing market is in such dire straights that two Senators are proposing a bill that would offer foreigners a visa if they invested $500,000 in U.S. real estate. The Federal Reserve will also send proposals to Congress about how to address the housing crisis, according to one Senator.

Though most Americans still want to buy a home, many don't think they'll be able to get one anytime soon, according to The Wall Street Journal. A combination of a lack of faith in the housing recovery and tight lending standards may explain why potential home buyers are staying out of the market.

The lack of confidence may in part be explained by the homeownership rate falling in the last decade by the most since the Great Depression, according to the Census Bureau. Instead, the housing crash has pushed the U.S. towards a "rentership" society, Bloomberg reports, and prompted more potential home buyers to move in with their parents or relatives, according to the Pew Research Center.

Still, it might make sense for renters to enter the market eventually. Renters now spend five percent more on their household costs than homeowners, according to United Press International.

Comments

[esoteric714]

08:53 AM on 10/25/2011

Another misleading article. Renters may pay five percent more, but with taxes and decreasing home values in the current economy, it's homeowners that take the bigger hit.

[ReaItors Are Liars]

09:57 AM on 10/25/2011

FALSE.

Rental rates are less than half the principal, interest, taxes, insurance and maintenance associated with ownership at the current grossly inflated asking prices.

And rents are falling.

[MsEngineer]

08:50 AM on 10/25/2011

I have watched House Hunters on HGTV since it started several years ago. It used to be: I want the biggest house I can get a mortgage for through "creative financing." Now it is: I don't want to spend all of my money, or I don't want to sacrifice other stuff for a house, or that house is too big for me. There is a real change in the way people are looking at housing and I personally think it is a good thing. Why does a couple with two kids "need" a 5000 square foot house with a three car garage, a pool, a finished basement and a large backyard?

[ReaItors Are Liars]

07:42 AM on 10/25/2011

Why buy a house today when you can buy later for 60% less?

[jrcurry3009]

04:03 AM on 10/25/2011

Obama cannot fix the housing crisis. Federal Governement cannot create jobs. It simply moves money around; less in one place, more in another.
All things boil down to money. Where is it, and where is it coming from?
Today, we read about building flats for the younger population, in lieu of starter homes. I believe that is exactly what overcrowded nations (China) have done for years. Take a close look at our bigger cities. Where do the people live: New York (flats), Chicago (flats), Washington D.C (flats)
Keep the borders open, and it will all be flats. That's what happens when the land runs out, and the King controls the land.
The bottom line is Government wants the land, for the land rules. All wars begin over ownership and control of territories. He who controls the land, controls minerals, oil, and water found within.
Get the picture> If not, begin reading history, dating as late as the 1400's.

[JustinP213]

04:02 PM on 10/24/2011

Young People have less money to buy food, let alone a house.

[oliver clothesov]

03:50 PM on 10/24/2011

what was your first clue, Sherlock when writing this filler article? and in other news, if you touch the surface of the oven when its red hot, you may not do it a second time...

[Media Saint]

01:44 PM on 10/24/2011

England:

Private renting has increased by 50% over the last eight years. Renting should be a positive option, but when ownership is held up by older people as a badge of distinction and rental contracts are short and insecure, who can blame younger people for hankering after the deeds?
A situation where there are more than 400,000 empty homes is bad enough, but 25 million empty bedrooms? That's in a different league.

Which leads us back to the question of who is rich. Ordinary middle-class people are facing a squeeze on their incomes right now, but they are the new rich because they continue to think a magical and astronomical price can be charged for their main asset, which is not just a home but also their chief investment fund.

Very often the 70-year-old with the £500,000 four bedroom home is the proud possessor of a final salary pension, which is why there is also a 4x4 car in the garage and holiday brochures strewn across the kitchen table.

http://www.guardian.co.uk/commentisfree/2011/oct/19/baby-boomers-hoarding-big-homes

[Tarpon22]

01:22 PM on 10/24/2011

No Confidence.
Oh it's not that at all.
No young people want anything to do with the Coirrupt Banks and will not dare take out a Home Loan with one of them.

They have all watched online as Banks take everyhouse they can to then let them ROT.
Owning a house no days is a good way to go broke or be stuck with one that is worth hafl of what you paid for it.

DONT BUY, force these Banks and Government to drop to their knees and start helping people instead of just the Bankssters.

VIVA LA REVOLUTION

[hypnotoad72]

01:08 PM on 10/24/2011

My parents (retired) want me to buy a home.  Unfortunately, keeping up with job market trends, and college, to remain "economically viable" is going to take up that excess income.

Renting is cheaper.

But until fundamental economic flaws are fixed, nothing is going to change and confidence certainly won't return.  And human nature, with the knock-on psychological effect, I predict will continue to grow more desperate and dire by workers, who are seeing their futures dissolve thanks to the "free market" proponents that also try to wiggle in exceptions to the "free market" rule whenever they feel it's convenient to do so.  (So don't use "energy independence" to win my vote, as I know all oil produced here is sold on the world, free market.  Especially when nothing that addresses real fixes is mentioned, because said politicians would rather sell themselves by the veneer of what they say.  They know what's in the details, and that will hurt their special interests (typically corporate or multinational).

[jrcurry3009]

04:14 AM on 10/25/2011

We have the hippie generation ruling. They owned vans and packed together to show free spirit, and avoid commitments, complicated situations, and responsibility. Their parents went through wars and times of financial unrest. These free spirits now control the economy. They don't know much about economics, but, a great deal about free speech.
Time for this generation to put on some gloves, boots, sunscreen, and plow some fields; learn about yield, market penetration, quality merchandise, and busines 101.

[mdsman]

12:51 PM on 10/24/2011

I think that this is good news.
People should think long and hard before purchqasing a home. They should wait until they can put down 20%. They should only buy a house they can afford.
A silver lining in a rather stromy cloud....

[ruolivert]

12:58 PM on 10/24/2011

Exactly! Home ownership isn't a right and nobody should be confidant in owning a home unless they are confidant they can pay for it and understand the terms under which they buy it

[Dieter Zerressen]

12:51 PM on 10/24/2011

I think Canada had this type of program in place for quite some time: invest a substantial amount of money in our economy (none of this "give us your tired, your poor, your huddled masses yearning to be free. The wretched refuse of your teeming shore" crap) and we'll welcome you with open arms.