Homeownership on the rise

Despite higher interest rates, the real estate market continues to chug along. It seems many buyers have adopted the philosophy of "its hard, do it anyway". Since 2015, America has welcomed approximately 10 million new homeowners. But who is propelling this steady surge in homeownership? The answer may surprise you.

Recently, I was helping a family member purchase a home in another part of the country. Not representing them, more coaching them along. The area where they were purchasing has become more competitive over the past 18 months, even with higher mortgage rates. This is an area that is not affluent, and many buyers would be seemingly priced out of the market. So what factor continued to drive demand and push prices higher? Retiring Baby Boomers.

Many people reaching retirement age have owned their homes for a significant amount of time, allowing them to benefit from home value appreciation and mortgage principal paydown. The result is this cohort has built a significant amount of home equity and although they may be working for another couple of years, they are buying their retirement homes now. This trend has intensified competition in certain regions, much like the example I shared earlier.

Another demographic contributing to the rise in homeownership is the younger middle-class households, aged 30-45. This trend reflects the growing population of individuals at the typical home-buying age. Due largely in-part to the proliferation of social media, I believe that homeownership has emerged as a mainstream “wealth hack,” convincing more individuals in this age group of the advantages of homeownership.

So, what happens now? Well, it is challenging to speculate on the future, but many are eagerly awaiting the Fed's next scheduled meeting early this coming week for further indications of future rate cuts. If there is one thing we've learned over the past 18 months, its that buyers have been a lot more resilient than many thought heading into a high interest rate environment.