Financial Fitness


Housing crash affecting Generation Xers worse than Millennials

Posted at 1:40 PM, Jun 17, 2016

Much has been made out of the housing struggles of millennials as they debate whether home ownership is even worth the costs. However, a recent study of housing data shows that the previous generation has suffered an even greater downturn in historical terms, and it may have profound implications for the overall housing market for years to come.

Generation X, defined as those born between 1965 and 1984, were riding high in 2005. Their homeownership rate was significantly above the historical average for their age group, ranging from a 3.5% increase in homeownership for those aged 35 to 39 to 4.3% for those aged 25 to 29.

After ten brutal years in the housing market, the situation has reversed. Gen X homeownership rates are now well below the historical average, with the age groups 30 to 44 anywhere between 7.0 and 7.9% below historical averages.

Millennials were having trouble getting into the market because of the Great Recession, but Generation Xers were already in the market and hit especially hard. Many were entering the market at precisely the wrong time, buying overvalued properties with higher-risk loans that left them overextended and vulnerable.

The plight of Generation X also comes at a bad time for the overall housing market. Homeownership tends to climb in middle age as the stragglers from each generation enter the market and other homeowners in that generation trade up to a more expensive home.

Large numbers of Generation Xers have been knocked back into the rental market either by necessity or by choice (out of fear of another housing crash). Those who suffered foreclosures or short sales may have to wait years before lenders will consider them for another loan. Generation Xers who do still own homes are equally fearful of entering the market again and trading up to a larger house.

This lack of movement is leading to extended gridlock in the overall housing market. Millennials who have managed to save up enough for a down payment and have good enough credit and income to qualify for a loan are having difficulty finding starter homes to purchase — too many of them are still inhabited by Generation Xers. As Rick Sharga, the Executive Vice President of said in the Wall Street Journal, "We've effectively wiped out a group of homeowners who historically would have been on their second or third properties by now."

The imbalance in housing is likely to be increased by basic demographics. There are approximately 83 million Generation Xers to an estimated 87 million millennials, and the millennial ranks are expected to increase to 93 million by 2025 via immigration, while Gen Xers stay roughly constant. Housing starts are increasing, but are unlikely to keep up with demand.

Meanwhile, the rental market is dealing with the influx of 3 million more renters in Generation X than would normally be expected, and the combined increase in Generation X and millennial renters is driving rents steadily higher. According to data from, rental vacancies have decreased every year since they began reporting vacancy data in 2009, resulting in corresponding increases in rents. A survey of property managers in the 4th quarter of 2015 predicted an 8% average rise in rents throughout 2016.

Unfortunately, there is no quick remedy to this problem. Housing is available, but the type of housing inventory does not match the needs. Builders are less keen to construct affordable housing due to lower profit margins. The situation will eventually correct itself, but it may do so too late to help Generation X.

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