Just look around today. There is so much going on from a decrease in job growth to an overwhelming amount of student loan debt; its no wonder why it is difficult for millennials to afford to buy a home. Studies show that 32.1 percent of millennials owned the homes they lived in in 2015. By comparison, 43.1 percent of adults younger than 35 owned their homes in 2004. So what is causing such a sharp decline in Millennial homeownership? The main reason millennials are a small percentage of buyers in certain markets is pretty obvious. Some of the reasons are affordability, slow job market, and increasing debt.
In many major metropolitan cities, the prices of homes are skyrocketing. Cities such as Chicago, Los Angeles, and New York City, has a constant rise in home prices and making it harder for millennials to afford a mortgage. “Homeownership is simply out of reach for many Americans, including many families. In today’s hot housing market, more Americans are renting than at any time in recent history,” according to Zillow. “Today’s buyers have a median age of 40, are married or living with a partner (70 percent), earn a median income of $87,500 annually and are overwhelmingly Caucasian/white (73 percent).” In addition Millennials are also likely to say they struggled to find a home in their price range and on their time frame, according to the report, and 37 percent say they went over budget, compared to 29 percent of all buyers. Plus most millennials say how difficult it is to afford a down payment for a house.
Another big factor that is stopping a lot of millennials from purchasing a home is the slow job market. Despite being an up-and-coming, in-demand generation, and one that’s consistently shaping how we think about work, millennials are still having a hard time finding reasonable jobs. The millennial unemployment rate stands at an unfortunate 12.8 percent, compared to the national average of 4.9 percent. This would affect their income and make millennials less likely to get approve for a mortgage.
Today, the student debt load is $1.4 trillion — equivalent to 35% of all non-housing debt nationally. Four in 10 first-time home buyers have some student debt, while a similar share of student loan borrowers (42%) delayed a move out of a family member’s home after college. Overall, 83% of non-home owners said they believe that student loan debt has delayed them from buying a home — and that figure is higher among older millennials (those born between 1980 and 1989) and people who have more than $70,000 in student loan debt. Millennials will get squeezed out because they wouldn’t be able to afford paying two large payments, which is paying on a mortgage and student loan, despite of interest rates.
For the most part, many millennials wouldn’t mind buying a house. In fact, about 80% of millennials reported that they would like to buy a home, and a majority even say that it’s part of their five-year plan. Yet 68 percent have less than $1,000 saved. Almost half, or 44 percent, have saved nothing at all. Given the fact that home prices are very high, and that the millennials are having a hard time trying to find a job, plus the amount of student debt, it makes a lot of sense as to why most millennials can’t afford a house.