These days, it feels like Millennial homebuyers are as rare as unicorns. Fewer people between the ages of 25 and 34 are buying their own homes; in fact, a surprising percentage of them are staying with their parents until well after the deadline established by previous generations. A recent analysis by the National Association of Home Builders presents a grim picture of Millennials and real estate.
Not Like Their Parents
It used to be that people in their mid-twenties to mid-thirties made up a large percentage of first-time homebuyers in the United States. That’s the age range when many people began settling down, starting families, and building lives together. But Millennials just aren’t buying. As of 2016 (the most recent federal data available to NAHB), only 40 percent of Millennials own their homes. That’s a 6 percent decline from 2000, representing about 2.4 million folks.
It’s no secret what happened. Millennials came of age during the Great Recession and entered the job market at the worst possible time. They have more student debt, relatively stagnant wages, and fewer prospects for increasing income in the future. That’s why 26.3 percent of adult children are moving back to their family homes. In 2000, that number was just 15.3 percent.
Dollars and Cents
When you break down house prices and compare them to Millennial wages, it’s clear why more than half of Millennials haven’t yet bought their dream homes. The median price rose to $323,100 last year, significantly outpacing inflation with nearly a 40 percent increase. At the same time, wages for this age group went up just 19 percent.
Mortgaging the Dream
This isn’t to say that Millennials aren’t buying at all. But they’re increasingly turning to their retirement funds to purchase homes. 1 in 3 Millennials admits to raiding the 401K for a down payment. Considering the debt burden these young adults already carry, maybe they should save up a little longer for their first homes.
What Does the Future Hold for Millennial Homebuyers?
Millennials have been blamed for destroying everything from mayonnaise to Applebee’s with their trendy tastes and internet obsessions. But the truth is that they’ve been dealt a pretty tough hand. Even though the economy is on the rebound, many young adults are still struggling with stagnant wages and astronomical student loans.
Natalia Siniavskaia, assistant vice president for housing policy research at NAHB, thinks that Millennials will eventually bounce back. “As the economic situation continues to improve it should give more stability and confidence to younger adults to buy their homes or leave parental homes,” she said. We can only wait—and hope—to see if that prediction proves true.