A new research study conducted by Fannie Mae and the University of Southern California (USC) looks at millennials and homeownership from a new perspective. The study compares the past and current homebuying behaviors of young adult homebuyers using cohort analysis rather than age-group analysis.
And the study reveals that millennials have actually been changing their attitudes about homeownership since the economic recovery, with their interest increasing substantially through 2016. For example, for every age transition above the 22-23 transition to ages 24-25, the increase in cohort homeownership rate was significantly greater from 2014-2016 than it was in either 2008-2010 or 2010-2012.
This method tracks increments in the homeownership rate for a cohort or group of young people as they age and advance from one age group to the next through different historical periods. Then it compares these rates for different cohorts passing through the same age transitions.
According to researchers, the traditional age-group analysis confuses recent home purchasing behavior with housing tenure choices made years ago. It not only paints an unnecessarily dark forecast for millennials’ prospects as homebuyers, but has also led to a negative and inaccurate perception that millennials don’t believe in homeownership as much as those from other generations.
The cohort analysis shows that home purchases by young adults first began increasing significantly between 2012 and 2014. For example, those transitioning from ages 28-29 to ages 30-31 experienced homeownership rate increment gains of 5% from 2012-2014 and 6% between 2014-2016. According to researchers, these gains were two to four times higher than gains for two older cohorts passing through the same age range between 2008-2010 and 2010-2012.
It provides a much more positive outlook about millennials and homeownership. It also seems to contradict the assumption that millennials have less interest in homeownership than those of other age groups. Instead, it indicates that millennials are just as inclined to buy homes as those of other generations when economic conditions are right.
The study was conducted by Patrick Simmons, director of strategic planning for Fannie Mae’s Economic & Strategic Research Group, and Dowell Myers, professor of policy, planning and demography at the Sol Price School of Public Policy at USC.
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