Millennials Slow To Embrace Homeownership

The “American Dream” of home ownership is not a dream that “Millennials” are embracing as readily as their “Boomer” parents did.

This group was maturing smack dab in the middle of the “mortgage meltdown”.  They witnessed and very possibly lived through family trauma and, as a result, may not view a home as the cornerstone of family investment nor as a relatively liquid asset.

Many experienced dramatic financial hardship in their immediate family, as their parents accepted transfers by their employers, were unable to sell their homes, temporarily rented in the new community, drained their cash assets while attempting to keep up both payments and eventually lost their former home, while finding themselves unable to purchase another home, due to credit destruction.  Many suffered this  catastrophic financial setback which then initiated a reduced standard of living.

Remember, for every one of the tens of thousands of foreclosures, there was a family eliminated from the housing market and, very possibly, a Millennial who shared their family’s “American Nightmare”.

It is no wonder Millennials became gun shy about home ownership and do not appear to aspire to the prospect as enthusiastically as did their forbearers.

Breaking Down Millennials and the Housing Market

Here’s a thought on why “Millennials” are not buying houses at the pace of their predecessors, the “Baby Boomers”.

Bloomberg notes that College Tuition expenses have jumped 538% since 1985 compared to a 121% increase in the Consumer Price Index and a 286% increase in medical costs during the same period.

The high student loan balances of many college graduates (equivalent to a luxury auto loan or two) and their high repayment schedule, creates a mortgage qualification problem for “Millennials”, which equates to a qualification problem for “first time homebuyers”, which equates to an opportunity problem for “move up buyers”, which equates to a problem for entry level and move up home builders, which equates to a problem for...well, you get the picture.

How much can a psychology, sociology, marketing, elementary or secondary education major expect to earn upon graduation?  How many times their annual “take home pay” will their final student loan balances be?  What ratio of their gross monthly income?

How much of a mortgage payment will their new employment income qualify for, once you take into consideration a $50,000 student loan payment?

The answer is…not very much.

Something has got to give. Either tuition must come more in line with their value, or many liberal arts colleges must turn into engineering and/or medical professional trade schools, as their graduates appear to be those who are getting jobs.

A liberal arts college education is a luxury, certainly not a right, and no longer comes with the presumption of employability, as it once did.

Millennials….choose your degree carefully.

Seniors Growing As Share Of Home Purchasers Due To Reverse Mortgage

Older Americans are a significant mainstay of home ownership in the US.  Home ownership among those 65 or older is stable at 80%.

In 1982, the home ownership rate was less than it is today in every age demographic other than seniors.  The hardest hit group are those under 35, where home ownership has dropped 12%.

And seniors are not just sitting on the sidelines clipping their coupons.  The biggest growth demographic, last year, for home purchasers was the 65-74 crowd jumping from 10% of total home sales to 13%.

Many seniors are opting for FHA Reverse Mortgages to either downsize or to borrow funds for renovating their existing homes to suit their current needs.  The Reverse mortgage brings an added benefit as it eliminates their monthly mortgage payment.