What’s Hampering Housing?
Tim Rood appeared on CNBC’s Street Signs on November 3, 2014 to discuss the impact of Generation X on the housing market. While many of us like to blame millennials for everything that’s wrong with the economy including the housing downturn, it turns out that Generation X, 35-44 year olds are also to blame for the housing slump.
Generation Y’s aka “millenials” have been slow to enter the housing market as evidenced by low first time homebuyer data. And Gen X can’t seem to get out of the market fast enough – 30% steeper decline than the overall decline in the homeownership rate.
Generation X were the first time homebuyers in the housing run-up and got caught up in the speculative hype about homeownership (dot com stocks and the eventual collapse of tech stocks in 2000 was because there was nothing “there” – they were valuing intangible things). However, real estate is “real” and there’s never been a national housing correction. They bought at or near the top and housing has become a cautionary tale for a lot of them.
Credit remains exceptionally tight. The tightness reflects an incredibly heavy handed regulatory environment that has erased the line between loan manufacturing risks and loan default risk. As a result, originators are not originating loans for at risk borrowers (660 credit score and below). This relegates would be homeowners to expensive rental alternatives and locks them out of the wealth creation opportunity of home ownership.