The homeownership rate of millennials is 8% lower than it was for Gen Xers and Baby Boomers when they were the same age, according to a new report by the Urban Institute. So why are younger generations struggling to obtain a home at the same rate as their parents were?
In its Millennial Homeownership report, the Urban Institute states that there would be 3.4 million more homeowners if millennials had managed to keep pace with their earlier generations.
Obviously they haven’t, and so the Urban Institute tried to find out why. It’s confusing at first because millennials are the most educated generation in the history of the U.S., but that unfortunately means that many are being hampered by student debts that prevent them from saving for a down payment on a home. The Urban Institute said its own research has found that it only takes a 1% increase in a person’s student loan debt to decrease their chances of buying a home. But the average student debt of millennials now is $19,000, way above the average debt of $12,800 that Gen Xers had when they were the same age.
Millennials face other problems too. They’re renting their accommodation for longer than earlier generations did and they have to pay higher housing costs too. As such, some analysts have started using the term “rent burdended” to describe many millennials that are forced to spend more than 30% of their income on their housing.
Another factor that makes it less likely for millennials to buy a home is that they’re generally waiting longer than their parents did before getting married. The median age for marriage has shifted from the early-20s in 1960, to the late 20s today.
The Urban Institute does however say that the new remote work trend that took off because of COVID-19 could push more millennials to look at buying a home, in order to give themselves more living space. Working from home has led to a desire among many people for more personal space, and it also gives some the freedom to move to other parts of the country where housing might be cheaper.
Indeed, realtor.com predicts in its 2021 Housing Forecast that millennials will really start to shape the housing market in the new year, and could even outnumber Gen Xer and Baby Boomer buyers.
“Older millennials will likely be trade-up buyers, while the larger, younger segment of the generation age into their key homebuying years,” realtor.com notes in its report.
Gen Z, the youngest generation, is also expected to emerge in larger numbers in 2021 and compete with millennials for a limited number of entry-level homes.