Homeownership is currently at an all-time-low after reaching its peak about a decade ago, as seen in this report by the U.S. Census Bureau.
In fact, homeownership rates have dropped to 62.9 percent, reflecting the lowest rate of homeownership since 1965, and experts are looking to millennials as the primary cause. Millennials are largely delaying the home-buying process, and this is beginning to be a problem.
The number of millennials, or individuals aged 18-34, living in the United States, has surpassed the number of Baby Boomers (ages 51-69) at a population of 75.4 million, shares the Pew Research Center. Statistics show that the numbers of millennials who own a house are at its lowest, and the trend is unlikely to change in the immediate years.
This might be true, but there is so much more than rent that comes into play when deciding to buy a home.
College loan debt is at an all-time high, crippling students’ chances of getting a secure foot in the homeownership market upon graduation. Not to mention, the competitive job market has also been getting increasingly complex for youth as well. In a recent study by The Guardian, it is revealed that millennials earn, on average, 20 percent less than their peers or those older than they are.
Let’s not forget that post-college-aged individuals are also thinking about the prospects of marriage and family, which is deeply associated with the act of buying a house. According to The American Family Survey, millennials view marriage as an important milestone in their lives, with only about 17 percent calling the institution “old-fashioned.”
The crash of 2005, ’06, ’07 and ’08 left home-buyers with huge amounts of debt as inflation skyrocketed. I know that when my parents had bought a home toward the end of 2007, I wished they would have pushed off home-buying for a little longer until the financial market was more stable. Just saying, watching your parents struggle isn’t going to leave a good impression on millennials when the time comes to buy a house.
There’s also a misconception that millennials plan on never becoming homeowners, and instead would prefer to rent a condo in the center of a city where they can flaunt their nomadic mentality and avoid any financial challenge. This is seriously untrue. Not only has a survey by the Urban Land Institute revealed that 21 percent of millennials are dissatisfied with their housing options or where they are in terms of homeownership, but data from Goldman Sachs reveals that up to 93 percent of millennials currently renting a place of their own plan to buy a home someday, with many aspiring to do so within the next five years.
Yet, the millennials that are “dissatisfied with their housing options” often aren’t aware of the opportunities present. For example, not too many people know that as little as two months’ rent is enough for a down payment in some cases. According to an analysis on individuals who qualify for lower down-payment options, conducted by Down Payment Resource and RealtyTrac, 87 percent of homeowners falsely believe they need 10 percent of the mortgage to have as a down payment. In reality, there is a wide range of assistance programs available across the country, and 2,290 of those programs are dedicated to overcoming monetary obstacles perfect for recent graduates.
In an article discussing his disapproval of the lack of education millennials have regarding homeownership, United Wholesale Mortgage CEO Mat Ishbia says, “People don’t know about this, we have to educate them—that’s our job in this industry.” He continues, “Educate consumers, educate the Millennial generation, educate everybody—they actually think they need to save 10 or 20% down, that’s why they’re over there renting.”
What’s even worse, says Ishbia, is that many millennials aren’t even aware of what they don’t know. Fourteen percent of millennial potential homebuyers are not familiar with what a mortgage broker is, while 37 percent have heard about brokers, but have no idea as to what they do. Brokers, for those of you who don’t know, are in charge of supplying clients with prospective homes, as well as advising them on negotiation matters. Sure, they are a bit pricey, but brokers have the ability to help millennials place a down payment as low as 1 percent on the house of their dreams.
And just like that, with that piece of knowledge, a millennial’s impediment has been erased.
Real estate professionals are responsible for educating millennials on homeownership, but millennials need to be willing to work with them to understand the stability of buying a home, as opposed to renting an apartment for years. Subscribe to financial websites that pertain to the topic and actually open the emails, read some of the Q&A Homeownership pamphlets on assistance programs available on the web, such as this one, or even take a free Homeowners Educational Certification Program online, such as the one offered on United Guaranty. If a college course is offered on the current market economy (which all colleges should), enroll in it and attend every class.
The goal here is to know where you lie on the financial spectrum and to realize the steps you need to take in order to leave the nest and give your parents some space. But, then again, if you’re tight with your fam and want to put off homeownership for personal reasons, then by all means, go ahead and stay snug in the nest until it’s your time to fly. Just know that many opportunities are waiting for you if you just decide to look.