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Home sales and home prices are up. Much, if not all, of the losses during the financial crisis are being erased in most parts of the country. But the market is seeing far fewer first-time home buyers than before. Some analysts say as younger buyers age, that will change. Others contend homeownership is on a slow decline. NPR's Yuki Noguchi explores the theories about the absent first-time buyers.
YUKI NOGUCHI, BYLINE: Trevor Burbank is single, 27 and has been house-hunting in Nashville for the last year.
TREVOR BURBANK: My rent's going up in August, so I have to figure out what I'm doing.
NOGUCHI: The last time Burbank looked, it was five years ago. He decided to use his down payment to start a business instead.
BURBANK: There was a house that I really liked, and it was going for $60,000. And I saw the house being sold in the past few months for just shy of $300,000.
NOGUCHI: His startup isn't generating much salary yet, so qualifying for a mortgage took some finagling. He's looking for a fixer-upper, but sellers are driving hard bargains on those, too.
BURBANK: In some cases, there's not even photos online. So you don't get a tour, you don't get photos.
NOGUCHI: He's losing out to investors buying sight unseen. That's a bridge too far for Burbank, so for now he remains on the sidelines. There's a big debate in real estate over where homeownership rates are headed and whether millennials, people who came of age around 2000, will get into the housing market the way generations before them did. The percentage of people under age 35 who are homeowners went from 42 percent a decade ago to just over a third now.
Lawrence Yun is chief economist for the National Association of Realtors. He says young people are squeezed from both sides. Rents are increasing even faster than home prices, and he says city politicians aren't making it easy for developers to build condominiums that would be good starter homes.
LAWRENCE YUN: We are creating this divide because of the ongoing housing shortage.
NOGUCHI: There are other factors everyone agrees are making it harder for today's younger homebuyers. They're delaying marriage, mortgages are harder to get, and people are staying in school longer, taking larger loans. The question is, is homeownership on a permanent decline because of high costs, changing demographics or new attitudes about homeownership?
JONATHAN SPADER: That's the million-dollar question.
NOGUCHI: Jonathan Spader is senior researcher at Harvard's Joint Center for Housing. He takes the view that ownership may stay the same, just delayed for the younger generation.
SPADER: We really haven't seen a shift in interest in homeownership among younger households.
NOGUCHI: In surveys, a huge majority - 90 percent of those under age 30 - expect to eventually own, he says. But their earnings took a hit in the recession eight years ago, and it's taking them longer to save up a down payment. Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute, takes a different view. She thinks the younger generation is simply less interested in homeownership.
LAURIE GOODMAN: This is a permanent shift.
NOGUCHI: Goodman cites a 2014 study by Fannie Mae of prime homebuyers. It found among young, college-educated, upper-income white families, homeownership fell 6 percent from 2000.
GOODMAN: And that sort of best captures this sort of subtle change in attitudes towards homeownership because this is a group for whom there's no reason not to be homeowners.
NOGUCHI: Of course, over 80 percent of them eventually buy. But...
GOODMAN: ...They're doing it later, and a lower percentage of them are eventually doing it.
NOGUCHI: And then there are the views of Ted Gayer, an economist at the Brookings Institution.
TED GAYER: I actually think that homeownership rates are likely to increase.
NOGUCHI: He says many young adults lived with their parents to weather the post-recession years. But as they age, more will start new households, and that trend will increase.
GAYER: This millennial generation is actually a rather large generation.
NOGUCHI: At 82 million people, he says, it outranks the baby boomers in size. And he expects that means a bigger housing boom is around the corner. Yuki Noguchi, NPR News, Washington.
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