Tenure Choice and the Future of Homeownership

Abstract

The future of American homeownership is being pushed in contradictory directions by demographic changes. The aging of the Baby Boomers would support higher levels of homeownership, but the increasing minority share of the population and the persistent racial gap in homeownership acts to reduce homeownership. Layered on top of these demographics is an uncertain mortgage underwriting environment affected by policy decisions and general economic conditions.

This paper projects that the number of homeowners will increase from roughly 82 million in 2015 to between 83 and 102 million by 2035, depending on assumptions concerning immigration and the underwriting environment. The homeownership rate is not expected to be substantially different from today’s rate of almost 65 percent under normal homeownership environments, but could reach as high as 68 percent if the loose underwriting environment of 2005 recurs, or as low as 57 percent if the current restrictive environment is institutionalized.

Keywords: homeownership, mortgage, credit, demographics, housing, tenure

JEL Classification: R21, R30, R31, G21