Demographer sees surge of interest in renting rather than buying a home
Although we might resist the implication that every aspect of our daily lives is mirrored in one demographic database or other, it’s probably true.
Cheryl Russell is a Beaufort, S.C., demographer who seems to have her finger on all manner of consumer behavior. She keeps track of not only what we buy but also why we buy it. The former editor of American Demographics magazine now is managing director of New Strategist Publications, which publishes demographic reference tools, primarily for libraries. She also blogs about the data nuggets that leap out at her, and what she thinks they mean for American culture, at demomemo.blogspot.com.
The statistics guru says real estate is facing a new paradigm, with huge implications for the rental market. She discussed what she sees changing in our attitudes toward housing, particularly among the young adults who would represent the next wave of home buyers.
What does a demographer do and how does that play into the real estate market?
Mostly we show the size of the market and what’s coming, the trends in buying. A demographer can explain or track the trends in the rates of household formations, which is when people establish an independent household. That’s extremely important because it drives the rental industry, it drives home buying, and it’s a huge factor behind consumer spending on furniture and appliances.
Where are we now on homeownership rates in this country?
The peak rate was in 2004, when 69% of Americans owned their homes. In 2010, it was 66.9%.
That’s likely to trend down more, a little bit, over the years ahead, as people have trouble buying homes and they lose their homes to foreclosure. But it won’t change that much more. I expect it’s pretty much going to stay in that 64% to 66% range for many years.
You see a surge of interest in renting rather than owning. Why?
Several things are going on now that have implications for home buying. First, there’s a massive loss of wealth in the middle class through their housing equity, which is where most middle-class wealth is. This ripples through the generations, because younger people aren’t going to have family wealth to help them buy.
Another factor in the loss of wealth is student debt. It’s preventing many people from being able to afford a lot of things because they’re paying off student loans.
The loss of wealth and greater debt make home buying, or even renting, unaffordable for many young adults.
Where is this going to be felt the most?
It’s turning young adults away from buying. The 25-to-29 age group, which is traditionally when the transition takes place to homeownership, is saying, “No, it’s not for me, I’m not going to make the mistake that my parents made. They’re trapped in their homes, and I’m going to try to be more flexible.” Plus, high unemployment rates and uncertainty in the job market make it too risky for young adults to commit to buying.
So how will this play out for them in the marketplace?
I don’t think enough time has gone by to show us that much about young adults going home to their parents.
But I see a resurgence in rentership. As these renters get a little older, they’ll want more specific features in their rentals. If I were a developer, I’d be very interested in rehabbing single-family homes and then turning them into rentals, but I’d make them more attractive for these young adults by adding bathrooms. If they’re going to have to have roommates, they’re going to insist on having their own bathrooms.
Obviously, zoning is going to have to change to allow these kinds of living arrangements, but a lot of things will have to change to recognize this new paradigm.
Umberger writes for the Chicago Tribune.
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