Millennials are known as the largest group of U.S. home buyers and have contributed about $514 billion to the housing market over the past year. Yet, they are behind where previous generations were at their age. Millennials aren’t lazy or uninspired to purchase a house, however, the factor of affordability plays a key component as to why millennials aren’t purchasing homes.
In recent reports, most Americans are choosing to rent rather than purchase a home due to low-priced homes becoming nonexistent. For most young adults, their wages haven’t been going up, but costs are. Only 39 percent of millennials can make the standard, recommended down payment of 20 percent or more, with 21 percent who put down the minimal amount to secure a home loan. In addition, 62 percent of millennials state they look into renting when interested in purchasing a home because they have accepted the fact that buying a home isn’t certain to be a strong investment decision.
Millennials who do insist on purchasing a home, tend to receive assistance. 29 percent report that they receive financial help from a family member or friend to make a down payment. 31 percent are known to collect funds from multiple sources. Millennials are facing struggles, such as finding a home in their price range and on their time frame. This results in 37 percent stating that they went over budget, comparing to 29 percent of all buyers.
Moreover, another factor as to why millennials aren’t purchasing homes would be due to important life decisions, such as marriage and having children. In 1967, more than 80 percent of those between the age of 25 to 34 lived with a spouse or partner. Now, this number has decreased to less than 60 percent. The decision of having children and getting married is holding Millennials back from purchasing their first home. Today, most people get married five years later than they did in 1970. Changing dynamics, such as having children or getting married do typically trigger decisions on buying a home due to the cost of these life events.
Furthermore, Millennials are continuing to move into cities. The percentage of Americans living in city centers increased from 28 percent to over 35 percent. Millennials are moving towards regions with a higher proportion of rental opportunities than homeowners. This results in rental prices increasing in urban centers, where they choose to live. Millennials are choosing to rent in urban cities since they aren’t willing to commute.
Although housing prices continue to rise in the U.S., evidence has suggested that home ownership is not out of reach for Millennials. Some financial constraints, such as down payments or social changes in a young adults’ decision into home ownership, remain, but evidently, millennials are generally optimistic and continue to search for homes within their price range.