Homes are more expensive than ever. Yet the rate of homeownership has risen dramatically in the last century. What's motivating America to buy?
Homeownership in a changing world
"Success" looks different for everyone. Age, location, upbringing, and social norms play a big role in what people consider a successful life. For some, it means excelling in a career and becoming financially stable. For others, it's raising a family and settling down. And for others still, there's value in travel and gaining rich experiences. So where does homeownership fit in?
To answer this question and better understand people's home-buying motivations, we surveyed 2,000 Americans all over the age of 18. We wondered if people equate homeownership with personal success — and if not, what truly motivates them to buy a home. Read on to learn about how homeownership has shifted, or jump forward to learn:
Personal success: Is homeownership in the picture?
For families in the past, homeownership was a huge part of what they considered a successful life. In the 1920s, America encouraged this ideal by creating Fannie Mae to insure mortgages, and in turn, increase the rate of homeownership. With the economic boom of the 1950s, the rate of homeownership skyrocketed and the image of the nuclear family with a white picket fence became the norm. The American ideal meant having an economically stable household — the pinnacle of which was to own a home. It was seen as a measure of success.
But when we asked people if they viewed homeownership as a measure of success today, America was divided: 48% responded yes while 52% said no. This divide signifies a shift from previous American ideals, implying that homeownership may not be as crucial to the notion of success as it once was.
Additionally, there are generational differences in how Americans view homeownership. Only 38% of people aged 18–24 view owning a home as a metric of personal success, as opposed to 56% of people aged 55–64. After this, the correlation plateaus. It appears that the older you are, the more likely you are to equate homeownership with the idea of success.
This makes sense based on recent housing trends. According to CNBC, researchers at the Stanford Center of Longevity found "homeownership declining most steeply among people under the age of 30 when compared with other generations." Perhaps this is because homeownership doesn't seem like a realistic goal due to record-high student debt and the rising cost of homes.
This is a significant shift from the baby boomer home-buying experience. In fact, the rate of homeownership among millennials at age 30 is only 36%. Compare that to the 48% homeownership rate among baby boomers at age 30 and the picture starts to take shape: young people today are less likely to buy a home than their parents were at the same age.
Americans are more motivated by financial stability than any other factor when buying a home
In 1940, the median home value in the U.S. was $2,938. Adjusted for inflation, that's only $30,600. But even with such low prices, homeownership was the exception, not the rule. Throughout the first half of the 20th century, the homeownership rate stayed below 50%.
Fast forward to today, where the rate of homeownership hovers around 64%. Homes are much more expensive than they were in 1900, yet the overall rate of homeownership has risen by 20% over the century. Today, people under 30 aren't buying homes like they used to, yet the homeownership rate has stayed fairly even. This could be because people are still buying homes, but they're just waiting until later in life to do so.
Since Americans are so split on whether they view homeownership as a metric of success, we wanted to understand what's ultimately driving homeownership today. To find out, we asked people what their top motivator is behind buying a home — whether they want more space for a family, to make a smart investment decision, or to fulfill their personal dream/the American Dream.
Thirty percent of respondents made "I know it's a smart financial investment" the top answer. Even though the median cost of a home has risen almost $200,000 since 1950 (and that's adjusted for inflation), modern mortgage-lending practices have made homeownership more accessible than ever.
Only 18%, on the other hand, said they wanted to own a home because it's the American Dream. It would seem that our measures for success have shifted since the 1950s. Back then, owning a home epitomized success. Today, owning a home is more of a stepping stool toward success. And perhaps we're less ideological about the classic "American Dream." Nowadays, our definition of success goes beyond the white picket fence to include overall financial stability.
Whether or not you own your home, make sure to protect it
Whether you bought a home as a smart financial investment, to house your growing family, or to achieve a dream, it's critical that you protect that investment. Insurance is designed to protect you financially. The more assets you have, the greater the risk of losing those assets if the worst happens. Insurance is also designed to help absorb some of that risk for you. And Esurance is here to make it simple. We created a home insurance calculator to help you figure out which limits make sense for you before getting a quote. How's that for surprisingly painless?
If homeownership isn't for you right now and you choose to rent instead, the same principles apply. While you won't need to insure the physical structure of your home or apartment (that's your landlord's job), it's still a good idea to protect the stuff inside. Renters insurance protects your stuff even if something happens outside your place, like if your phone gets swiped from your car.
At Esurance, we're committed to making insurance simple, transparent, and affordable — for all generations.
Sources: U.S. Census Bureau 1, 2 | CNBC | Pew Social Trends
This study consisted of 2 survey questions conducted using Google Surveys. The sample consisted of no fewer than 1,000 completed responses per question. Post-stratification weighting has been applied to ensure an accurate and reliable representation of the total population. The survey ran during May 2019.
10 things to look for when buying a house
Look out for these things to make the home-buying process surprisingly painless.
7 life milestones that call for a review of your insurance
Make sure your insurance is keeping up with your life.