Trouble at Home
Did Generation X’s nesting mania spark the economic meltdown?
by Susan Gregory Thomas
December 22, 2008
THE SUN'LL COME OUT
"Understanding Generational Differences in Home Remodeling Behavior," a landmark study published by the Joint Center for Housing Studies at Harvard University (JCHS) in the Fall of 2005, captures telling data about Gen-X home owners. As an archeological document, it's an important artifact because it freezes the moment in time just before the housing crash, and might help explain, at least in part, how it happened. "We're not only better educated than baby boomers, but we made more money, too."
According to the report, Generation X in 2005 had higher home ownership rates than any previous generation, in spite of the recent housing bubble. In 1983, when older baby boomers were between the ages of thirty and thirty-nine, their aggregate home ownership rate was 60.6 percent; that number dipped slightly a decade later to 55.8 percent for younger baby boomers in their thirties. In 2005, at the same age (between 30-39), 61.4% members of Generation X owned homes.
Why? A major reason, the report pointed out, is that Generation X is much more likely to look at their home as an investment than previous generations, owing largely — you guessed it — to having lived through the '90s recession, followed by the stock market losses in the early '00s. For those of us crawling our way out of the wreckage of the dot-bomb period, that's what made those low- or no-down payment and ARM mortgages so irresistible. Indeed, surveys conducted by the National Association of Realtors show that four out of ten first-time buyers used no-money-down mortgages in 2005 and 2006; the median down payment for first-time buyers in those years was just two percent.
What this seems to mean is that the collective feeling was, basically: screw stocks, invest in a home, pay for it when you get back on your feet. This seemed like a no-brainer for phoenix-like Gen-Xers. After all, in spite of the pronouncement of a much-cited 2004 study of generational differences that Gen-X "went through its all-important, formative years as one of the least parented, least nurtured generations in U.S. history" — and that half of all Gen-X children's families split, and forty percent were latchkey kids — we'd always not only landed on our feet, but kicked some serious booty, too.
For one thing, we're not only better educated than baby boomers, but we made more money, too. According to American Housing Survey data collected by the U.S. Census, Generation X entered the housing market in 2003 with median incomes nearly 50% higher than older baby boomers, and $12,000 higher than their most immediate predecessors, the younger baby boom. So what if the housing prices were so high now that we couldn't afford to buy? "If we use education as a proxy for future and potential wealth," surmised the JCHS report, "this indicates that members of Generation X carry the same potential for high future earnings."
Right! That's just what we were thinking, too. Indeed, according to the General Social Survey (GSS), a sociological pulse-taker of American households conducted by the National Science Foundation since 1972, Generation Xers in 2000 had higher levels of confidence in their own financial situations than any other generation — "an indication," concluded the Harvard report, "that Gen Xers have more actual or perceived opportunities for upward financial mobility." Far be it from the banks to have disabused anyone of that notion. Personal anecdote: After signing onto a five-year ARM mortgage in 2002, I remember the loan officer at WAMU telling me and my husband that although we were cash poor now, he could tell that we were the kind of people who would make money in the future. We were the kind of people, he said, that the bank wanted to "invest in."
