Millennials – the generation generally defined as those born between 1980 and the mid-1990s – have no interest in buying homes. Or, at least, that’s the latest argument we’re seeing in Forbes, dubbed “Attitudes of Young Americans Bode Ill for Housing.” But, is this really the case? My sense is that it’s much more circumstantial than a foreboding ill will toward homeownership.
The argument hinges on a few key facts and observations: 1) Millennials, for the most part, have no money. The author states that 90% of U.S. born millennials (or “Echo Boomers”) has less than $1,500 in assets. 2) Millennials value education, people and leisure more than other American generations. And 3) Millennials question the importance of homeownership.
No money, no house
That’s the reality of today’s lending market, to be exact. Lenders no longer write no-money down mortgages so it makes sense that a group that generally is strapped for cash wouldn’t be interested in buying a home. Remember too that this generation also is saddled with the highest average amount of school debt than any other before it. They’re facing a tight job market that offers little opportunity for high wages. Putting yourself in these shoes for a moment makes it loud and clear why buying a home – the largest purchase of your life – is not going to be top of mind.
It’s all about the experience of life
Studies have shown that millennials are taking much longer to “settle down” in a career and lay roots in one place. They are taking longer to get married – if at all – and delaying children. These are all life circumstances that tend to spark a home purchase.
The housing boom and bust have left scars
Many millennials express skepticism about housing because they’ve witnessed an unprecedented crazy time in real estate. They may have witnessed their parents cash out tens of thousands of dollars in home equity only to see their home values plunge to depressing levels a few years later.
Any rational person would rightfully walk carefully into a real estate experience after this.
Are millennials really saying they don’t value homeownership or is what they’re really saying that they’d rather wait until they are ready? Who wants a mortgage payment when you’re still traveling the world, experiencing different jobs and career paths and haven’t yet taken the plunge with a lifelong mate? Can’t blame them for that, really.
These folks are still young. The economy is still not optimal for them. I don’t believe for one minute that a delay in home buying has anything to do with millennials’ true view of homeownership. This can be easily seen by the fact that young entrepreneurs who strike it rich almost immediately make a run for real estate. (The San Francisco Chronicle recently discussed this in an article looking at increasing home values in city neighborhoods that seem to be impacted directly by the success of young tech companies like Zynga and Yelp.)
Millennials will come around to homeownership eventually. Although that delay is what will most impact the recovering market, it’s got nothing to do with values.