A place to call home
Fewer millennials are buying real estate.
Is that a bad thing?
Long seen as a cornerstone of the American Dream, homeownership increasingly appears out of reach for many millennials. Whether that means the dream is fading—or perhaps just requires a bit of rethinking—remains to be seen.
U.S. Census data shows only 39 percent of millennials owned homes in 2015, compared to 47.5 percent for that same age group in 2007. The share of those who are first-time buyers is hovering near 30-year lows, according to the National Association of Realtors.
Many of the challenges millennials face go back to the housing crash that sparked the Great Recession, said Reid Cramer, a policy analyst with the New America Foundation in Washington, D.C. “The predatory mortgage products have disappeared, and that’s a good thing,” Cramer said. “But in response to the recession, lenders have tightened mortgage standards and are requiring more money down to secure loans.”
Homeownership has declined among all age groups since the recession, according to Census data. But first-time homebuyers—many of them millennials—find themselves in a perfect storm, according to economist Lawrence Yun of the National Association of Realtors. Rents are rising faster than wages, making it hard for renters to save for a down payment, while, home prices also continue to rise.
Millennials also have record levels of student debt, and loan repayments are siphoning off dollars that could have gone to buy a home. Student debt is the primary reason why the share of 25-year-olds living with their parents increased by 63 percent between 2000 and 2013, according to a study by the New York Federal Reserve Bank.
Even millennials who are in a good position to buy are “a little gun shy,” said Nancy Keenan, a realtor based in Atlanta. “They came of age during the recession, and all the conversations around the house were of gloom and despair. They saw the worst, and now they’re just beginning to see the uptick.”
Are millennials really unable to buy homes, or are they choosing not to? Generation Y is marrying and having children later than previous generations, reducing the appeal of the traditional single-family home. And some millennials are shunning homeownership to stay flexible as they focus on their careers.
“I talk a lot of millennials out of buying homes,” said Sophia Bera, a financial planner and founder of Gen Y Planning, based in Austin. “They face a lot of pressure to buy from their parents, because that was the American Dream.”
“But millennials value mobility,” Bera said. “Putting down roots too early can make it a lot more difficult to navigate our careers. And true financial freedom for many millennials is about being debt-free rather than owning a piece of property.”
The bright side
But homeownership still has its benefits and that explains its enduring appeal for families who have the stability and financial wherewithal to buy. Neighborhoods with more owners than renters are more likely to offer amenities like good schools and safe streets, Cramer said.
Homeowners also can take advantage of generous tax breaks and build equity that can be tapped in retirement years. And a recent Trulia study found that as of late 2015, buying was cheaper than renting in all but two of the largest metropolitan areas in the United States.
That was true in Atlanta, where Iche Nathans, a 28-year-old accountant, is realizing big monthly savings—and starting to build equity—by buying a home with her fiancé. “Our friends who are married or in long-term relationships are all buying, or considering it,” Nathans said.
When considering whether to rent or buy, there’s a lot to think about. As this generation looks ahead to the future, a variety of housing options are available that can be customized to each life situation.