The American middle class was built on the back of home ownership, which has been falling for twenty years. 2016 was no exception, Pew reports:
Even as home values climb back from the dramatic fall that helped set off the Great Recession, homeownership in the United States stands at its lowest level in at least 20 years. As of the third quarter of this year only 63.5% of households own their homes, down significantly from the modern peak of 69.0% reached in 2004.
A Pew Research Center analysis of Census Bureau and mortgage loan data indicates that the decline in ownership since 2004 has been more pronounced among households headed by young adults, blacks and those in the lower income tier. A substantial portion of the ongoing falloff in homeownership reflects fewer renter households transitioning to homeownership, rather than homeowners being forced out of the market through foreclosure or other financial difficulty.
Buying real estate is the way middle class families build wealth in America. Much has been written about stagnant wages, but the decline in home ownership is another reason most Americans are generally only as wealthy as they were three decades ago.
There are many causes of the home ownership decline, and one of the biggest has to do with the uncertainty of the modern economy. To sign a 30-year mortgage, people need to know that they’ll be able to make regular monthly payments. But even successful people often change jobs these days. Renting provides more flexibility, particularly in the expensive cities where many young people live.
These big-picture challenges and the trauma of the Great Recession notwithstanding, government policy ought to focus on helping people buy homes. As millennials move out to the suburbs, there will be opportunities to get them paying mortgages and building wealth for their families. Encouraging more movement to the suburbs is thus a very good way to help reverse the home ownership decline. We hope it becomes a priority for the Trump administration.