Owning a home used to be at the heart of the American Dream. But that seems to be changing as homeownership rates in the United States decline and more Americans opt to rent.
The homeownership rate in the United States will drop to 61.3 percent by 2030, down from 65.1 percent in 2010, according to a new study by the Urban Institute. The homeownership rate – the ratio of households that own to overall households – hit 63.7 percent in the first quarter of this year, the lowest it’s been since 1990.
An Urban Institute blog called the lower homeownership rate “the new normal” for the United States.
Here are five highlights from the report:
- The United States is on the verge of a rental surge. Of the 22 million new households that will form between 2010 and 2030, the majority (59 percent) will rent. “It remains to be seen how much and where this shifting of the established housing stock will satisfy rental housing demand and whether builders in fast-growth regions will be able to expand the apartment supply quickly enough to meet the demand for new rentals,” the report said. “Absent such responses, rents are likely to remain high — perhaps even enough to depress household formation.”
- Most new households will be non white. Seventy-seven percent of the 11.6 million households that form between 2010 and 2020 will be non white. Between 2020 and 2030, 88 percent of new households will be non white. The Urban Institute said non whites have lower homeownership rates than whites, so they are driving the forecasted surge in renters. In 2030 the study predicts, 70 percent of white adults will own homes; 40 percent of African-Americans and 48 percent Hispanics will own their own homes.
- The homeownership rate is declining for all age groups (except seniors older than 75). Although total homeowners will outnumber total renters through 2030, the overall homeownership rate is still predicted to drop. “We need to expand credit availability in the mortgage market to help ensure that more creditworthy families can access homeownership, which offers greater housing security and more opportunity for wealth-building than renting,” Urban Institute said.
- African-Americans will continue to fall behind other racial groups in homeownership. While the homeownership rate for African-Americans will drop over the next 15 years, a higher percentage of Hispanics will purchase a home. “More than 50 percent of the 9 million new owners between 2010 and 2030 will be Hispanic, nearly one-third will be other races or ethnicities, 11 percent will be African-American, and only 7 percent will be white,” Urban Institute said.
- Senior-headed households will soar. The number of households headed by seniors (older than 65) will increase from 25.8 million in 2010 to 45.7 million in 2030. This surge in senior-headed households “increases the urgency to develop policies that allow seniors to stay in their homes as they age,” Urban Institute said.
A recent survey found that just 11 percent of American adults cite owning a home as the top sign of success. Interestingly, a study of Generation Z (teens aged 13 to 17) found that 82 percent of teens said homeownership is the most important factor in achieving the American Dream.
Check out “How Rising Home Prices Hurt Us All.”
Are you a homeowner? Do you think owning your own home is a core component of the American Dream? Share your comments below.
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