What's happening with homeownership trends specifically for the Millennial generation?
This article is going to explore the historical behaviors of this group of adults and what's possibly changed as we are finally seeing a rise in homeownership for Millennials.
If you were born between 1981
and 1996 you are classified as being a part of the millennial generation — now the largest generation in modern-day U.S. census numbers.
But up until now, many within the enormous population of Millennial adults were not interested in homeownership.
In 2019, even though they were old enough to do so, only 43% of millennials owned homes, which was well below
the national average of 65% when taking every other generation into account. However, 2022 marks a
notable change in the rate of millennial homeownership. To understand why this change may be occurring we have to first understand why there was no previous motivation.
What kept millennials from previously buying homes?
There were many reasons why those of the millennial generation were not previously interested in buying real estate at the same rate as other generations, but some of the primary reasons cited by these would-be Minnesota homeowners for their disinterest in previous years included:
- Entrance into the job market during the "Great Recession"
- Higher student loan debt
- Stagnant wages
- Delayed life events - marriage, children
- Rising home prices
- Declining available inventory of homes for sale
- Rising rental rates
Let's break this down a bit further...
The financial challenges many young adults have today were exacerbated by the fallout from the Great Recession. Keep in mind that 40% of all unemployed individuals in 2009 were between the ages of 15-24 years old.
The federal minimum wage has been at $7.25 since 2009 — despite some states increasing their minimum wages. And even though the cost of living has increased substantially over the past few decades, median wages had only grown by around 0.3% each year from 2007-2017. These factors combined made it more difficult for millennials to buy homes.
If you add the cost of raising a family to these numbers the chances become slimmer by the day.
Additionally, this is the generation that had been drilled by education and parental warning NOT to overextend and get strapped with credit. As a result, their day-to-day cash flow may have been enough to suffice their needs and wants, but many were left with no credit score to speak of without that credit - or low credit because of student loans. Now you have no (non-existing) credit scores coupled with the high cost of living debts (shelter costs, utilities, education, food, and health) and low savings ability.
It's a firestorm of roadblocks.
Why do we see millennial homeownership increasing now?
When the Federal Reserve dropped interest rates towards the beginning of the COVID-19 pandemic, buying a home became more appealing as a result of the reduced monthly payments. It wasn't until 2022, however, that millennials started buying homes at a higher rate than anticipated. While only 43% of all millennials owned a home in 2019, this same age group accounted for around 43% of homebuyers in 2022.
Current data suggests that millennials are now the primary generation buying homes for sale in Minnesota and across the country.
The vice president of demographics for the National Association of REALTORS®, Jessica Lautz, recently stated that she believes "Some young adults have used the pandemic to their financial advantage by paying down debt and cutting the cost of rent by moving in with family."
By saving during the first two years of the pandemic, millennials who were previously facing poor financial situations prior to the pandemic may now be at a point where they can afford to buy their first home.
Millennials are also aging into more financial security, with steadier jobs and higher incomes in their 30’s and 40’s, and an increase in remote work post-pandemic has also allowed more millennials and Gen Zers to move to smaller, more affordable cities and improve their homebuying prospects.
It's still not so simple for many in this generation, however.
With the cost of rents still on the rise, housing rates that continue to rise (but more palatable as of August 2022 as compared to all of 2021 and into the spring of 2022), and the still challenge of credit-building in the wake of another looming recession, millennials still face a number of uphill challenges, but homeownership rates do increase considerably when looking at millennials who are around the age of 40 today.
It
will be interesting to see what happens in the coming months as home values continue to rise, availability of homes still continues to be a challenge, and interest rates start to level off. In the meantime, the Millam Real Estate Group sits poised to help millennials meet their goals of homeownership here in Minnesota today.
The Milliam Real Estate Group is a diverse collection of real estate support specialists, industry experts, and marketing staff helping
buyers and sellers across the northwest metro area of the Twin Cities and rural counties of Wright, Sherburne, Hennepin, and Anoka counties reach their real estate goals! Learn more, at: www.millamrealestategroup.com
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Schedule a FREE Real Estate Strategy Call with Lori Millam today by calling 763.333.7445. Or, start with a message on our Contact Page.
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