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The volatility of the housing market over the last few years has made a huge impact on many buyers, but, none more so than Generation Y. Many of these buyers (most of whom were born between the mid-1970’s to the early 2000’s making them anywhere between 18 and 34 years old) want to buy a home, but, have taken a huge monetary beating from the recent recession, financial and housing crisis.
Some recent research from the John Burns Real Estate Consulting firm has shown that the number of adults who are living with their parents dramatically increased over the last eight years. While many of these men and women believe that the American Dream includes owning a home, many believe that they won’t be able to purchase one until much later in life. Many things have contributed to this phenomenon, the three major things include:
Many of the people graduating from college are coming out of college with huge student loans on their record. Some people owe upwards of $100,000 to various lending institutions. This high cost of higher education has made it more difficult for those who do not take high paying jobs (i.e. teachers, nurses and others), but still owe a high amount of debt. These obligations make it more difficult for Millennial to save up the necessary amount of money to make a down payment.
Lack of good employment options
Persistently high unemployment has been the tragedy of the recession that began in late 2007. Historically, this is the slowest recovery of the economy since World War II. Many problems with Millennial home ownership stem from the fact that the unemployment rate among 18-34 year olds is a staggering 22%. Even a college or graduate degree doesn’t guarantee you a job if you are freshly graduated. This forces these college graduates to take a lower paying job while searching for a better one further delaying when they are able to afford purchasing a home.
High pressure on wages because of financial crisis
Unfortunately, even if they are able to find a decent job, the high unemployment has created a high pressure on worker’s wages – especially over the last five years. Downward pressure on wages make it difficult for Millennial to save up the necessary amount of money they need for a good down payment along with other debt obligations like credit cards or student loans they may have.
Credit is also not as easy to get as it used to. Before, many people were not required to demonstrate proof of income or security when buying a house. After the housing crisis, that all changed. It takes a lot more documentation and proof to get a lender to consider loaning you the money to own your own home. Credit companies want to see a good credit history along with a good credit score.
Millennial living at home
After college, many people move back in with their parents in order to save money and make it easier to find their own place. However, because of the combined factors, many of the Millennial generation find themselves stuck at their parent’s house and aren’t able to save enough to get out on their own.
Generation Y homeowners are in the sweet spot of home buying, but they are having a tougher time than any other generation that came before it to buy. This has also contributed to the very slow housing recovery we’ve seen over the last few years. A new generation who are all delaying their first home purchases have prevented the economy from helping the housing market recover as quickly as it has in the past. Until high unemployment and student loans are dealt with, Generation Y may have to deal with a delayed onset of their adult lives and responsibilities.