The unequivocal fact that millennials are waiting longer to get married and have children is having an unexpected effect on the housing market. This past year, homeownership rates hit a 48-year low, and some believe this is in part due to millennials living at home until their 30s.
Despite these disheartening statistics, Jed Kolko, former Chief Economist at Trulia and current Senior Fellow at UC Berkeley, believes that “millennials are actually as likely to own a home and as likely to live with their parents as young people were 20 years ago.”
Young adults are not completely foregoing homeownership!
So why is homeownership low for this group?
Kolko’s theory for why homeownership among the millennial age group is so low is specifically related to people waiting longer to marry and have kids. And this is directly related to young adults attending college and taking on large amounts of student loans.
“Student debt makes it harder to pay the rent and harder to save for a down payment, but it also matters whether that student debt led to getting a degree. Among people who took on debt but obtained a degree, their ability to eventually own a home is better, because having a college degree typically raises the income,” Kolko said.
Kolko notes, that once student debt is under control, millennials are marrying, having kids, and purchasing homes. It’s just taking them a little longer than it did previous generations.
Different preferences for this generation
Millennials are also interested in purchasing condos in urban areas, instead of houses in the suburbs their parents were so desperate to escape to. “They’re really into high-rise neighborhoods, which have seen a big increase in well-educated young residents,” Kolko said.
An interesting number to keep in mind comes from Zillow, which announced that first-time home buyers are now waiting six years to purchase their first house, the longest span in recent history. Svenja Gudell, Zillow’s Chief Economist, said that young people have to take that time to “save for a down payment and qualify for a mortgage.”
Six extra years to save for a down payment
While millennials may have to take six extra years to save for their down payment, they definitely want to own a home. Zillow has also made public a number of surveys which show that young adults are more than ready to own their place.
Perhaps a glimpse into our changing societal norms is the fact that homeownership rates are also rising in the 65-74 year-old age bracket, due to rising divorce rates.