by Anthony O. Kellum for the Atlanta Daily World
If you were wondering whether or not millennials are buying homes, the answer is yes…a lot of them. For the last five years in a row millennial represented the largest share of the housing market, capturing 36 percent market share, according to Anna DeSimone, author of Housing Finance 2020 and a housing advocate. So, the answer is: Yes. Millennials. Are. Buying. Homes.
First, let’s be clear on what constitutes a millennial. They were born between 1981-1997. Although over the last several years millennials have captured the largest share of the market, they are slow out of the gate compared to early generations when it comes to homeownership. Today’s people aged 25-34 are actually taking the homeownership plunge and buying their first piece of property. Their buying decisions are mostly based on the right social and economic conditions, meaning they are buying homes particularly as they get married and start a family.
It’s no secret that the millennial buyer either lives at home with her/his parents or prefers to rent leaving the perception that homeownership was not a priority of this generation according to the National Association of Realtors. But that might not be the issue. Some would argue that owning a home as easier for the previous generation. Millennials are also facing more hurdles in the housing market, such as the increase in housing prices and the number of homes on the market are shrinking. According to Zillow, starter home prices have increased by 57.3 percent over the last five years, while inventory has dropped by 23.3 percent.
Research indicates that millennials are even more interested than their parents and grandparents at the same age were in homeownership, however, the generation’s homeownership rate is lower due to financial issues such as lack of a sufficient down payment, credit card debt and student loans. Not to mention, over the last 15 years wages have basically remained dormant while the cost of living, education, and housing has skyrocketed.
Under the right social and economic circumstances, today’s millennials are buying, especially as they get married and start to have families. The thought process is similar to the idea of attending college after high school — homeownership is the natural progression.
Make no mistake, the generational gap in homeownership is real. According to Forbes, 2019 there is a significant lower number of millennials who own homes (32 percent) compared to older generations. The rate of Gen Xers is 60 percent and 75 percent for Baby Boomers.
Compared to previous years, Millennials are slower to the punch as it related to buying homes. However, the argument could also be make that affording a home was easier during those earlier Gen X and Baby Boomer generations.
For many, they have been advised not to spend more than 30 percent of their monthly income for the purchase of their home to avoid the possibility of financial hardship. A closer look into the buying trends of millennials indicates they are being more cautious.
Other factors that may affect the slower buying decisions of millennials include:
Experiences over things:
Millennials are valuing things such as experiences, above homeownership (56 percent to 79 percent.) They are also opting for good health, financial security, leisure time and a happy marriage over homeownership (56 percent to 61 percent.) According to a 2017 survey by market research firm Gfk Global.
Burden of Student Debt:
Student loans are out of control and has hit a record $1.5 trillion, with millennials owing much of that tab.
Millennials are increasingly hopping from one job to the next, often with some lag time ranging between weeks to months without jobs. Because of these job insecurities, many are opting to build up their savings to tide them over in case of an emergency.
Although millennials are generally buying homes at a slower pace, they are still making homeownership purchases. They are just being more prudent in their buying decisions.
“Home is where the story begins”—Author Unknown
Anthony O. Kellum is president of Kellum Mortgage, LLC.