Millennials: Is homeownership in their future?
Maryalene LaPonsie | Improvement Center Columnist | September 6, 2013
With mortgage rates still hovering at record lows and homes for sale at bargain prices, wouldn't it seem as though now is the perfect time for young adults to be buying homes? And with no existing homes to unload first, 20- and 30-somethings should be the ones in the best position to benefit.
But Millennials and young Gen-Xers aren't exactly snapping up properties. According to Census Bureau data, only 36.3 percent of those younger than age 35 owned a home at the end of 2012, down from a high of 43 percent in 2006.
So why aren't young adults buying houses? Undoubtedly, the current economic climate is partially responsible, but it does not entirely explain the phenomenon of delayed homeownership. For some young families, the answer may be that the ideal of the American Dream no longer involves a white picket fence.
More young adults staying in the nest
Millennials may not be buying homes, but they have to be living somewhere. For many, that somewhere happens to be with Mom and Dad.
A 2012 report from the Pew Research Center raised eyebrows when it found 39 percent of 18-34 year-olds said they live with their parents now or have moved back temporarily. While 24 percent had returned home after living on their own, many never left in the first place.
While conventional wisdom might indicate living with parents would be a negative in the eyes of young adults, the Pew study found most boomerang Millennials don't have a problem living under the same roof as their elders. Of those surveyed, 78 percent said they were satisfied with their living arrangement.
Student debt, high unemployment may be to blame
One reason young adults may be okay living with their parents is that many are likely feeling a financial pinch. Staying with the folks is cheaper than renting or buying a place of their own.
A 2012 report from the John J. Heldrich Center for Workforce Development at Rutgers looked at college graduates in the wake of the Great Recession. It found that only 51 percent of graduates surveyed were employed full-time. For those who did find jobs, their median starting salaries had dropped to $28,000 from a pre-recession figure of $30,000.
Meanwhile, many may also be weighed down by heavy student loan debt which makes it difficult to qualify for a mortgage, let alone pay for it. Young Invincibles, an advocacy group for young adults, published a study last year outlining how student debt is forcing graduates to delay homeownership.
According to Young Invincibles, the average single student debtor would have a debt-to-income ratio of .49 when a mortgage is figured into the calculation. A ratio that high likely disqualifies graduates from both FHA and private mortgages.
Renting may be the first choice for Millennials
However, for some Millennials, even if they could get a mortgage, they may not want one. In today's mobile society, renting offers young adults the flexibility to move virtually at will rather than be tied to one location.
In addition, the median age for marriage has been inching up in recent years. A 2012 National Health Statistics Report from the Centers for Disease Control and Prevention found the median age for first marriage for a woman was 25.8 and 28.3 for a man. Along with delaying marriage, Millennials may also be delaying all the trappings that come with it, including a house.
Or it could just be that Generation Y is, as The Atlantic puts it, the cheapest generation. Rather than take on 30 years of mortgage payments, young adults may simply see renting as the better option -- one that frees up wads of cash that would otherwise be poured into endless home repairs and upgrades.
Still, not everyone is convinced Millennials have given up on the American Dream of owning a house. In an interview with the Chicago Tribune, Better Homes & Gardens real estate president and CEO, Sherry Chris, said young adults are just being smart when it comes to buying. Rather than jumping into homeownership, a Better Homes & Garden survey indicates young adults are waiting until the time -- and their finances -- are right.
Whether it is because of money or lifestyle choices, it is clear some Millennials won't be buying a house any time soon. And that seems to suit them just fine.