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39 » VISIT US ONLINE @ DSNEWS.COM BABY BOOMERS IN POSITION TO CONTROL MARKET'S DIRECTION Baby boomers and other homeowners over the age of 55, which number about 67 million, control about two-thirds of the nation's aggregate home equity, which computes to about $8 trillion. ese numbers put this group in a position to greatly influence where the housing market will go in the next decade, according to Freddie Mac Chief Economist Sean Becketti. "Whether they decide to move from their current homes or age in place, the cumulative impact of their decisions on mortgage demand, affordable housing supplies, and the housing options available to millennials and other aspiring homeowners will be substantial," Becketti wrote. Freddie Mac's survey of nearly 4,900 homeowners age 55 and over (a mix of men, women, Caucasian, African-American, and Hispanic, and Asian), revealed that the majority of baby boomers are satisfied with their current homes (about 64 percent) and that 90 percent believe people their age should own a home. Nearly everyone surveyed said homeownership makes sense for married people with children (96 percent), and a majority said it makes sense for people without children (85 percent). About 63 percent of respondents said they prefer to age in place, which would compute to about 42 million homeowners spread out across the entire 55+ demographic. However, that still leaves approximately 40 percent of boomers (27 million) who said that if they had complete control, they would move at least one more time. According to Freddie Mac, 19 million of those boomers plan to buy a home and eight million plan to move in the next four years. "ese are big numbers with the potential to tighten home buying competition in the housing market, especially for millennials and other first-time homebuyers," Becketti wrote. "ey also have the potential to generate significant new demand for mortgage credit. Whether the borrower is financing age-in- place renovations or buying a new house, even a relatively modest increase in lending to 55+ homeowners could add trillions of dollars in new originations in a relatively short time. One way or another, the baby boomers' housing decisions over the next few years will take our market to brand new places." HIGHER EDUCATION NOT LEADING TO HOMEOWNERSHIP e U.S. homeownership rate (63.5 percent in Q1) is near its lowest level in nearly five decades and appears to be retreating after a couple of quarters of gains. e millennial generation, which is the demographic that many economists and analysts believe will be the key to increasing the homeownership rate, has generally been slow to buy a home. Why are millennials not becoming homeowners as quickly as some analysts expected they would? ere are different theories. A study by TransUnion last year showed that student loan debt was not hampering millennials' access to credit. Also last year, Freddie Mac released a report stating that the low homeownership rate among millennials is still "something of a puzzle," but that it cannot be explained solely by rising student loan debt. However, a recent survey from the National Association of Realtors (NAR) and SALT, a consumer literacy program provided by nonprofit American Student Assistance, found that student loan debt is likely a larger factor in hindering homeownership among millennials that some of the other reports found. e survey of student debt holders current in their repayment in varying amounts of debt reveals that 43 percent of those polled had between $10,001 and $40,000 in student debt, while 38 percent had $50,000 or more. e most common debt amount was $20,000 to $30,000, according to NAR. About 79 percent of older millennials (ages 26 to 35) hold the highest amount of debt at $70,000 to $100,000 in total debt, and more than half of non-homeowners in each generation report that it's postponing their ability to buy. NAR reported that nearly three-quarters of non-homeowners who are current in their repayment of student loans said they believe their debt is what is keeping them from buying a home. More than half of the survey respondents said they believe that the student loan debt will delay them from purchasing a home by more than five years. In addition to those numbers, about 40 percent of respondents said that student loan debt was preventing them from moving out of another family member's household after college graduation. It is somewhat ironic that student loan debt would be preventing people from becoming homebuyers, since getting a higher education is intended to promote upward mobility, according to Lawrence Yun, chief economist with NAR. "A majority of non-homeowners in the survey earning over $50,000 a year—which is above the median U.S. qualifying income needed to buy a single-family home—reported that student debt is hurting their ability to save for a down payment," Yun said. "Along with rent, a car payment and other large monthly expenses that can squeeze a household's budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase." In late March, the Federal Reserve Bank of St. Louis theorized that the sharp increase in homeownership in the decade prior to the homeownership rate peak of 69 percent in 2004 played a large role in the declining rate—or in other words, the bursting of the housing bubble and the Great Recession brought on a reversal of the trend of financially weaker families going from rental housing into homeownership in the decade before the bubble. e St. Louis Fed also reported other possible explanations for the low homeownership rate, including: the possibility that homeownership today is not as attractive as it has been in past decades because of fluctuations in home values, the tightened standards for obtaining a mortgage loan, and the fact that many millennials consider the prospect of being "tied down" to a house and the obligations that come with it less attractive than previous generations.

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