It’s a crucial question because it’s quite possible for land market failure to cause people’s incomes to be too low for them to move into houses, which depresses future expected land values, and hence future economic growth, like Japan. It certainly doesn’t help us that our intrepid authors admit that first-time homeowners amount to 30 to 50 percent of buyers, and that “in the time series, renter-to-owner transition flows tend to lead the business cycle and house price growth.”
So basically, under normal conditions young families think things are getting better, so they jump onto the land value train. I wrote about this as social reproduction a while back. The Fed economists turn to the Survey of Consumer Expectations to answer why this isn’t happening.
For one, they find that not even 45 percent of current renters expect to move and buy in the next three years. No idea how that compares to past years. Then they discuss the reasons renters who rate the likelihood of such a move at 60 percent or less gave.
Too much debt and too little income. Hope those debts aren’t those student loans I keep reading aren’t causing any economic damage ’cause that’d just makes the problem worse. The study doesn’t find much evidence of skittishness about future housing prices falling, which you can take as you will.
If you want to see how bad things are, here’s the number of households by age bracket and their respective homeownership rates from the Census Bureau’s Housing Vacancy Survey (Table 12).
Maybe we should rename the country the United States of Houses Owned Only by Old People. USHOOOP works for me.