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Housing Defriends the Facebook Generation

by the Center for Geoeconomic Studies
January 19, 2012

Change in U.S. Homeownership Rates


Many U.S. policymakers, not least at the Federal Reserve and the Treasury, continue to pin hopes for a robust economic recovery on the housing market.  They should consider that one demographic particularly badly hit by its collapse has a long memory.  That’s because they’re young.  They’ll be around for a long time, and will bear its scars financially and psychologically. As the figure shows, the change in homeownership rates from the 1996 trough in the Case-Shiller Price Index to its 2006 peak was by far the greatest among the under-30s.  Total household homeownership rates increased 3.4 percentage points over this period, to 68.8%.  For 25-29 year olds, however, the increase was a much higher 7.1 percentage points – to 41.8%.  For under-25s, it was 6.8 percentage points – to 24.8%.  The rise in homeownership among the young was particularly remarkable given the much lower base from which it started.  What effect did the housing bust have on them?  Household balance sheets among the Facebook generation were the hardest hit: between 2007 and 2009, half of those under the age of 35 lost over 25% of their wealth.  A quarter of those under 35 lost over 86% of their wealth.

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