Young Americans struggle to buy their own homes

Young Americans struggle to buy their own homes
House for sale in New Orleans.

Two months ago, the Golems started looking for their first home in Washington, DC, but their search took them from downtown to beyond the city boundaries in Virginia. Still, they found nothing that they could afford.

"We were looking in Georgetown, and as we did, we realised it was just not affordable for what we make," says Mrs Heidi Golem, 28, who is a designer. Her husband Jon, also 28, is the director of engineering in a hotel.

"We were kind of crushed," says Mrs Golem.

The couple now rent a one- bedroom apartment in Crystal City, just outside Washington, for US$1,900 (S$2,380) a month.

Their experience is not unique. As the United States' housing market starts to pick up, one group has definitely been left out: young buyers.

A decade ago, about 42 per cent of those under 35 owned their own homes in the US. Today, that percentage has fallen to about 36 per cent, and most experts expect the downward trend to continue.

The US situation mirrors trends from all over the world. In Singapore, the affordability of housing is one of the key concerns for young couples, while in England and Wales, recent studies show that the number of homes owned by people under 35 fell from 2.2 million to 1.4 million between 2001 and 2011.

"This may be the new normal," says professor of real estate and finance Susan Wachter, from The Wharton School at the University of Pennsylvania. "Owning real estate in the superstar cities of the world is not for the young."

While some view this as a natural economic trend, there are those who worry that it means social mobility is stagnating. Home ownership, they say, has been the principal method of wealth accumulation for generations.

For the most part, home ownership among young Americans has remained elusive for three main reasons - the lack of good jobs, tightening credit and the rise in student loans.

While the economy might be on the rebound, the fact remains that young Americans are finding it difficult to get jobs. The Great Recession caused the employment rate among young Americans aged 20 to 24 to slip to 61 per cent in 2011, from 72 per cent in 2000.

Adding to the problem is the fact that these young individuals have taken hefty student loans to pay for their college education. Some have chalked up US$100,000 in debt even before entering the workforce.

"Those (student) debts, and the tighter lending standards, are really going to result in slower attainment of home ownership," says professor emeritus of economics Donald Haurin from Ohio State University.

"Housing prices in the US are back to 2004 levels but wages have not kept up," adds Prof Wachter.

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