One year ago, we published a Thought Leadership post, “Who are Millennial Homebuyers.” The post examined what millennials want in a home, why millennials that do purchase a home choose to do so and why so many millennials are holding off on purchasing a home compared to previous generations. First-time homebuyers are an extremely important component of a robust housing market. Without them, full recovery may be compromised. One year later, with the housing market on the rebound and a stronger economy – how has the relationship between home ownership and millennials changed and what does the future look like for this rocky relationship?
The Current State of Affairs
Unfortunately, first time homebuyer levels haven’t improved, according to data from Standard & Poor’s. This year, new entrants to the housing market accounted for 28 percent of all home purchases – the same share they claimed in June 2014, which is well below the historical average of 40 percent. Roughly half of millennials indicate that they are “extremely” or “very” likely to buy a home in the next year, according to Forbes, which is the same percentage reported in 2014.
Why the Delay in Homeownership
Last year, the National Association of Realtors’ Home Buyer and Seller Generational Trends Report found that the majority of respondents cited student loan debt as the biggest obstacle millennials face toward homeownership. This year, Standard & Poor cited a lack of a sizeable down payment, followed by failing to qualify for a home mortgage as the most frequently cited reason why renters choose to rent.
This year’s report, unsurprisingly, also cited tighter bank lending restrictions, low credit scores and student debt as reasons. One of the more surprising statistics indicated that many young adults are living with their parents, as opposed to purchasing a house of their own. Today, a 30 year old is just as likely to live with their parents as they are to own a home. In sharp contrast, a young adult in 2003 was more than twice as likely to own a home than live with their parents.
Though the year hasn’t shown much improvement for first time homebuyers, economists remain positive that millennials will increasingly settle into homeownership. Redfin found that 38 percent of millennials would even delay a wedding or honeymoon in order to purchase a home. While the want is there, many millennials are just waiting for the right conditions to plunge into homeownership.
“The slowly healing jobs market, coupled with more reasonable home-price appreciation trends and chances of higher interest rates, may mean first-time buyers could be about to enter the property market at greater rates,” according to Standard & Poor.