I’ve written myself that the Millennial’s are the bane of every Realtors existence; a generation seemingly content to remain in their parents basements or in a group rental in perpetuity, going with the flow and landing wherever the latest relationship or social-media based job opportunity takes them. These are just not the people looking for houses to buy. At least that’s what I believed. Someone recently suggested to me that it was the result of a generation of adults (my generation) coddling their children and never requiring them to make a decision, allowing them to drift and stay at home as long as they needed a soft landing from their latest failed attempt to get out of the house. Seemed harsh, but in an amusing way, somewhat logical.
It’s a generation whose family structures consisted of, for the first time in history, more single-parent households than “traditional” households; a generation where nearly 83% of those traditional households had two incomes and struggled to make ends meet. It makes sense that these parents would feel slightly more guilty of the time they spent at work and not with their kids. Naturally those parent allow their kids more freedom, more leeway, a softer landing and more second chances. The Entitled Generation.
But a closer look at the data tells a very different story. Research shows that 75% of Millennials interviewed saw home-ownership as a long term goal, and nearly as many felt that it was also a good investment. Of those interviewed, 65% said that they planned to purchase in the next 5 years, and only 16% said that they did not plan to buy a home at all. The National Association of Realtors reports that of the 12,000 Millennial’s tracked and surveyed on their website during the first 6 months of 2015, 65% planned to purchase within the year.
So why is home ownership at an all time low, and why is this generation not actively purchasing homes? The answer is actually very simple. Even as home prices hit an all time low in 2010-11 and as interest rates have remained historically low for so long that nearly everyone takes it for granted, the Millennials are presented with challenges not faced by any generation of young people since the end of the great depression, when only 43% of adult Americans owned homes. They came of age in the worst job market in history and while median income fell from an all-time high in 1999 to a staggering 20-year low in a span of 10 years. They went to university in record numbers, but at a time when tuition was at its highest point in history, having increased more during the 6-year span from 2004-2010 than it had during the previous 25 years. Saddled with student loans they couldn’t pay because they had no jobs, their credit was badly damaged out of the gate. Credit card debt brought about by lower wages and increasing living expenses contributed, with 60% stating that after consulting with a mortgage lender they could not purchase until their credit was restored. Meanwhile, the median home price since their parents purchased their homes has nearly doubled from $120,000 to $220,000 while median income for the same 20-year period has reverted to the 20-year old mean. To put that in perspective, the 10% APR rate that their parents paid on their $120,000 home in 1990 costs a Millennial about the same at today’s 5% rate on a $220,000 home, only the cost of living has increased by almost 60% during that span, according to the Social Security Administration and they must put twice as much down to secure the prime rate on that note.
In other words, the challenges are real. I look upon the real estate industry through the veil of my own experiences, frequently comparing the market today to the one that I bought my first home in nearly 16 years ago. I remember the challenges I faced then, and consider with great respect the young people who I have worked with the past few years when buying their first home. What this generation has endured on the path to homeownership is an obstacle course that none of us ever had to navigate. It’s time to give them a break.