There’s no single reason for relatively low millennial homeownership. Rather, it’s a confluence of socioeconomic trends that serves as an impediment to millennials purchasing a piece of the American dream.
The urban revival in America’s biggest cities, like New York, San Francisco, Los Angeles, and Washington, D.C., has been fueled by young people’s preference for living in those cities. Major employers looking to attract young talent have followed suit by setting up offices there.
These cities have historically been expensive, but housing prices have risen since the financial collapse. Rents in coastal cities have far outpaced wages, making it hard for millennials to save money for a down payment. The housing supply in these cities is also constrained, driving up the price to buy.
Millennials are also waiting longer to get married and have children. Millennials have been slower to pass through these stages of life than other generations, beginning with moving out of their parent’s house.
Delays into entry for these life changes may be just that — delays. As millennials age, some will end up getting married and having children, leading to more interest in owning a home down the road.
Student loan debt and tight credit limits may make homeownership financial unfeasible. Buying a home used to be the largest expense a household would incur in their lifetime, but over the last 20 years student loan debt has ballooned, loading millennials up with debt before they reach prime home-buying age.
Coupled with tighter mortgage lending standards since the financial crisis, student loan debt has made it harder for millennials with little credit history to qualify for a mortgage.
Increasing education to improve financial literacy, streamlining the mortgage process, and expanding the scope of credit evaluations to include rent and utility payments are possible ways to increase millennial homeownership.
If you’re a millennial and you have questions about homeownership, then schedule a mortgage consultation with me and I can walk you through the process.