According to a study by the Urban Institute, when looking at the 25-34 age group, millennials are behind Gen Xers and baby boomers in homeownership rates by 8-9%age points. When comparing overall homeownership rates in 2015, millennials were behind baby boomers by 42.8% and Gen Xers by 28.2%. Here is a breakdown of the biggest reasons the millennial demographic has been lagging in the home ownership front:
Delaying Major Life Events
Milestones like marriage and childbearing are associated with higher homeownership rates; in fact, the possibility of owning a home increases by 17.9% and 6.2% each for those who are married or have children. According to the 2015 Census, only 40% of millennials are married (compared to 47.5% of the previous generation when they were a similar age). Many millennials are also waiting longer to have children. Between 1990 and 2015, the proportion of married households with children (with a household head age group of 18-34) decreased from 36.9% to 25.7%.
Due to rising tuition costs and the fact that more millennials choose to pursue higher education than previous generations, an estimated 36% of millennials have student loan debt, compared to 18% of Gen Xers and 4.1% of baby boomers. The huge debts collected by these individuals make the prospect of saving for a down payment and actually obtaining a mortgage more than a little unrealistic.
Rising Home Prices
Millennials also tend to gravitate towards urban locations like New York and San Francisco - high-skilled cities with employment opportunities and facilitation of a youthful lifestyle. These areas, however tend to be significantly more expensive than more suburban or rural areas.
In order to address these challenges in the industry, an important primary step which must be taken is to increase awareness of government-sponsored programs through financial education as part of a high school or college curriculum. Urban Institute also proposed a “streamlined and tech-centered mortgage application that shortens the process and more thoroughly assesses risk.” Another idea is to revise student loan debt reporting and change land-use and zoning regulations, but those are definitely long term and big picture changes.