Statisitics in recent years have shown that millennials aren’t buying homes at the same rate as previous generations. Instead, many are opting for home rentals, apartments, and living with relatives.
Many are tempted to stereotype millennials and assume it’s just because they’re lazy and don’t have the same drive and work ethic, but this is not the case. Instead, there are many social and economic factors that have led to Generation Y’s hesitance to buy homes. Let’s take a look at five of them.
Not Getting Married Sooner
Most millennials are aware that they’re not getting married at the same age as their parents and grandparents. That is why they are not in a rush to homeownership. Most of them aren’t even thinking about marriage until they’re past their mid-20s.
However, it doesn’t mean that they are against marriage. Most millennials just feel that they aren’t financially stable enough to tie the knot just yet. We’ve come a long way from the days when a person could expect to get married, have children, and buy a house right out of college.
While there’s a lot of talk about how Gen-Y is changing the economic landscape, it’s no secret that many of them still live with their parents. Most of them prefer to stay with their family or just rent.
It is unlikely for them to buy a house until they see themselves getting married. According to a U.S. Census Bureau report, 24 million young adults ages 18 to 34 lived under their parents’ roof in 2015.
Shortage of Starter Homes
Millennials are facing a unique set of hurdles as they go from crashing on the couch to buying their first home. They’re facing a system that works against them, one that’s doling out favors to more established buyers and neglecting the needs of those just starting.
In the U.S alone, only 20.9% of homes were starter homes in 2018. Adding to these struggling numbers are the real estate investors rushing to buy these starter homes.
New York Times reported that these big-time investors bought 20% of U.S starter homes in 2018. Even though millennials have the urge to have their first home, they are facing this shortage. They’re boxed out of the housing market or have to go through bidding wars with big-time investors.
Paying Student Loans
Generation Y is the generation that is being burdened with massive piles of debt when they start their career.
To start, they have to pay thousands of dollars in tuition every year. To pay for that, they have to take out student loans, which leads to a huge financial burden. More than 44 million people are carrying $1.5 trillion in student debt in 2018 alone, and they find it hard to purchase homes of their own.
As soon as they get a job, they are burdened by crippling student loans, slow salary increases, as well as the rising cost of living.
With student debt saddling them, millennials are seeing their purchasing power diminish. They are unable to acquire a home loan since banks consider the debt a major risk factor.
The Great Recession has also left a significant number of young members of Gen Y in peril. They witnessed their parents struggle to maintain the same lifestyle and watched as the economy struggled to regain its footing.
Many felt a different level of uncertainty growing up during this period. Thus, fearful of market volatility, they are hesitant to purchase a home.
Increasing Home Prices & Interest
Having a college degree was the equivalent of homeownership back in the 1950s, where Americans could afford to buy homes and have families (thanks to cost-effective and affordable student loans).
Today it’s more like buying a McMansion during a real estate boom. Houses used to be affordable with average monthly salaries, but became unaffordable once interest rates grew above 10 percent.
One factor especially hurting the ability of millennials to buy homes are higher interest rates for loans and growing home prices.
For most millennials, it’s not a smart financial decision to take out a high-interest home loan for a housing market with increased prices. Instead, many of them are working to pay off their debts and build up their credit score to hopefully be in a better financial place.
Different Housing Perspective
In the past, homeownership was viewed as a rite of passage for young Americans. Most Americans buy a home early in their lives and settle in one place to raise a family.
But with skyrocketing home prices, many millennials are finding that the financial burden is just too heavy.
Instead of settling for something less than perfect, many are choosing to build their careers and savings for a long time before putting down roots. Many of them figure that if the price of a home is very high anyway, they might as well save up for one they actually want.
As such, this generation is synonymous with delayed homeownership. When they finally step up to buy a house, they are skipping over their traditional first purchase in favor of something more impressive, something with more personality, even though it means it’s more expensive.
Overall, Generation Y has adopted a new approach to real estate development. This generation is more likely to seek out a unique home that they can make into their own.
Conclusion
There are many reasons Generation Y isn’t keen on homeownership these days. From rising prices to increasing debts, many millennials are struggling to keep up financially.
Many of them do not see the need to own their own home either, considering that millennials are getting married later and later.
All of this has ultimately changed their perspective – rather than buying a home right out of college, they see it as better to save up for a home they truly want to live in when the time comes for it.
