Bill Lindeke’s Chart of the Day from Thursday about changing homeownership rates shows what are indeed significant changes in the last decade in homeownership rates. For an even longer-term perspective, we can turn to IPUMS data from the American census. A question on homeownership has been asked in every census since 1900, with the exception of 1950.
Before the Great Depression the structure of home finance was quite different than it was today. Deposits of twenty percent were higher, and some banks required even higher fractions of the purchase price up front. Mortgages were significantly shorter, often no longer than seven years. Two sequences of events propelled American homeownership rates significantly higher than the 45% at which they persisted for the first third of the twentieth century. First, home-ownership fell significantly during the Great Depression and the federal government stepped in to backstop housing finance (see, for example, this accessible history of the New Deal changes and their consequences by Alex Gordon). Second, as Wellesley College economic historian Daniel Fetter has recently shown, rent control during World War II and post-war housing finance assistance to veterans led to a sharp rise in homeownership rates during the war and immediately after it.
Fetter’s research has shown that the World War II and post-war increase in homeownership rates was driven by changes among young adults who bought homes earlier than previous generations. If the recent trends are also concentrated in particular cohorts of young people, the recent decline in homeownership may last a long time.
(Note: I’ve used adult men’s homeownership rates to control a little for demographic change. The trends are fairly similar for the whole population.)