Gen-Xers don't want to be homeowners

home sale sign
Not everyone is keen on the idea of owning a home.

Millennials are often blamed for the drop in homebuying, but Generation X isn't jumping on the homeowner bandwagon either.

The U.S. homeownership rate has been falling since 2005, and Gen-Xers are a big part of the decline.

Homeownership among those aged 35-54 has dropped the most of any other age group since 1993, according to Harvard's State of the Nation's Housing 2015 report -- especially those under age 44.

"The market peaked right when they were at peak first-time buying age," said Daniel McCue, senior research associate at The Joint Center for Housing Study of Harvard University.

And the older members of the generation were at the age when people normally trade up to bigger homes, just when the housing crisis struck.

"They were subject to the decline in home prices, which made [some homes] subject to distress, underwater and delinquency," McCue said.

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The homeownership rate, which currently sits at 63.7%, has been propped up by Baby Boomers, the report found, a trend Gen X might not be able to support given its smaller size.

"When we look at Millennials, their homeownership rates are low ... they have a much higher chance of building careers and catching up, but for those aged 35-44 it's more of a question," said McCue.

Generation X, which the study defined as those born from 1965-1984, play an important role in the housing market. Their trading-up activity frees up inventory for new first-time buyers.

But this isn't happening: The number of homeowners aged 35-39 has dropped 23% from 10 years ago, according to the report.

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Instead of buying, Gen Xers are staying in the rental market longer. "The normal cycle of renting and moving onto homeownership and making room for younger renters to follow isn't happening as quickly," said McCue.

And they might not become homebuyers any time soon. More demand in the rental market has led to higher rents, which makes it harder to save for a down payment.

Stagnant wages also make owning a home a financial hardship: For households aged 35-44, incomes are at mid-1980s levels, the report found. The situation is more grim for those aged 45-54, whose incomes are the lowest since the end of the 1960s.

Memories from the housing crisis can make potential buyers hesitant to commit to homeownership.

But we could see more Gen Xers become homeowners soon with the return of those who lost their homes during the crisis.

About 11 million people were foreclosed on during and in the wake of the housing crash, according to Lawrence Yun, chief economist at the National Association of Realtors. Only about 2 million have returned to the market since.

"The remaining percent, we will see a steady conversion from renting into ownership," he said. "It won't be sudden, it will take some time."

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