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.