NEW YORK (MainStreet) Young families are worse off today than they were 24 years ago. That's the startling conclusion of research conducted by the Federal Reserve Bank of St. Louis. The average young family -- households headed by someone under 40 has suffered the most during the financial crisis and subsequent recession, recovering only about one-third of the net worth they lost since 2007.
The collapse of the housing market bears most of the blame.
Young families have abandoned homeownership in large numbers, primarily due to foreclosures, distressed sales and a delay in buying into the market by newly-formed households. That means rebounding home values have been missed by so many of the young families that would have had the most to gain.
The St. Louis Fed says the "real" wealth of a young family net worth adjusted for inflation - was about $108,000 at the end of the third quarter of 2013, 30% below its 2007 level and more than 8% lower than the 1989 level -- a period of 24 years.
The St. Louis Fed research notes that as of 2013, homeownership rates appeared to be continuing to decline among young and middle-aged families.
"It is reasonable to expect that, at some point, the homeownership rate will stabilize for both groups and for the population as a whole," the report says. "Yet, the sharp declines in homeownership rates experienced among non-elderly families in recent years suggest that the typical pattern of increasing homeownership rates over the life cycle may trace out a lower trajectory than evident at the housing peak. The result of lower homeownership rates at every stage in the life cycle would, of course, translate into a lower homeownership rate overall. Thus, it appears unlikely that the overall homeownership rate will return to its peak level any time soon, if ever," the report concludes.