Home Ownership Rates soar as people move into their late 30s and 40s, so a rise in households in this age group would naturally be expected to boost the overall home ownership rate. Some see approximately a 600,000 decline in the number of households headed by those aged 35 to 49, simply because the number of folks in that age group will decrease.
The demographer does project a huge increase of seven million in households 50 and older, mainly because of the baby-boomer effect. The residential real estate market might benefit somewhat, assuming people over 50 buy second homes as investments or vacation properties. But the impact probably won't be great.
The economy, as always, calls the tune in the housing market. The subpar recovery we are experiencing, which is likely to be followed by a subpar expansion, is tailor-made to help spawn a generation of renters.
In the past, young people who need the down payment for a home have often been helped by what jokingly has been called the new G.I. bill: generous inlaws. But given the economic constraints those inlaws will be facing imposed by higher taxes and the need to build retirement savings their generosity could be severely limited.
Some inlaws can perhaps afford to retire, but can't sell their home at a decent price in most of the U.S., housing in general isn't appreciating, or is appreciating more slowly than it was, prebust. Or, they might rent out part of it, while continuing to occupy the rest. Or, if they move to a retirement property elsewhere, they might keep a couple of rooms in the old homestead as a place to return to on visits to the kids. And maybe their tenants will be their own adult children renting, of course, at a reduced rate even zero.
More likely, however, the new version of the G.I. bill will take the form of, say, providing the adult offspring with the first two months' rent for an apartment, plus security deposit, rather than the much heftier cost of a down payment on a home.
Requirements on that down payment have climbed. According to the Federal Housing Finance Agency, the share of new mortgages requiring a down payment of less than a 10th of the house price was 8% last year, down from 29% in 2007.
Michael Frantantoni, research vice president of the Mortgage Bankers Association, says the early 1990s were the last time the share of new mortgages permitting a down payment of 10% or less ran in the single digits. In fact, the average down payment on all mortgages last year exceeded 25%. The last time it was that high was also the early 1990s.
We've moved from a world where most of the effort was on streamlining the mortgage application process to one where full documentation is the norm. Every data point needs to be checked and rechecked. One of those data points includes higher standards on credit scores.