There seems to be a lot of angst about millennials and homeownership, and it’s all about when they’re going to get serious about it. And that anxiety is increasing as the costs of homeownership start to rise. Without the millennial generation buying into the quintessential cornerpiece of the American dream, the dreams of home builders might have to be adjusted — downward.
Just 35% of homeowners are younger than 35 and the number hasn’t been that low since 1982. But, there are good reasons for the decline and according to many sources it’s not because millennials don’t want to own homes. Instead, it’s about student loans, lack of credit history, desire to live in expensive metropolitan areas, and not wanting to be committed to one place, according to a U.S. News and World Report article. In some regards it’s about staying flexible, with one source saying more millennials got burned in the housing crash than many people think. That’s keeping them uneasy about jumping back into the market.
Millennials and Homeownership Optimists?
Anybody making their livings from the buying and selling of homes are understandably optimistic about the intentions toward homeownership by those between the ages of 24 and 35. LendingTree did a survey and reported millennials are still very much interested in homeownership, with only a little over 4% saying they never want to own a home. However, the company didn’t cite any statistics to support its optimism. But it did wade into the statistics and reasons they aren’t buying homes:
- 67.4% cited a higher salary or income was necessary before they could buy a home
- 33.3% want to move to a more preferred area before buying
- 28.7% want to pay off student loans before becoming homeowners
- 25.7% said homeownership would be a possibility after they spent time and money on other things, such as traveling, investing and philanthropic missions.
The survey also uncovered that nearly half of millennials have less than $5,000 in savings, making the $30,000 average entry cost to homeownership, well out of reach.
The Elusive Answers
The California Association of Realtors took a slightly different approach to its fact finding on the topic and reported that 54% of millennials gave homeownership a high rating (more than 8 on a scale of 1-10), and 59% said the housing crash didn’t affect how they felt about homeownership. However, 76% couldn’t afford to buy a home. While student debt is often cited as a damper on millennials and homeownership, this survey found that while about half are carrying student debt it isn’t affecting their decision not to own a home. Interestingly, this survey found the opposite to numerous others when it came to where the millennials wanted to live. According to the realtor association, most respondents want to live in single family homes in the suburbs on large lots instead of in the often reported urban centers.
But regardless of reasons cited by surveyed millennials, there are larger economic forces at work that could keep them out of the market, and even derail housing’s advancement. Kevin Young, an IBISWorld procurement analyst, recently wrote about the potential effects of a Federal Reserve hike in interest rates, something that could happen as soon as June 2015. IBISWorld forecasted the prime lending rate will jump 2.2% from 2104-2017, raising the cost of borrowing. That, and the continuing rise in home values could signal the concern about millennials and homeownership is well founded.
Time will tell. How about you? If you’re between 24 and 35 years young let us know what you think about home ownership. Leave a comment.