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Millennial Homeownership Is Low. Why?


Millennials own fewer homes as compared to previous generations. What are the reasons for their low homeownership rate? What does the future hold for millennial homeownership?

Millennial homeownership is lower than previous generations

The homeownership rate is defined as the number of household heads who are homeowners, divided by total household heads (homeowners + renters).

In 2020, Millennials and Gen Zs (age < 45) had an estimated homeownership rate of only 46%. In 1990, Boomers and Gen Xers belonged to the same age group (< 45) – their homeownership rate was much higher, at 53%.

Projected and actual homeownership - generational cohorts.

This gap is likely to persist into the future.

What are the reasons for the low millennial homeownership?

1. Fewer millennials are getting married

Married folks are far more likely to be homeowners. In 2015, the homeownership gap between married and unmarried homeowners was a staggering 35 percentage points.

Homeownership rate - married vs. unmarried Americans.

However, millennials (those aged 18-34 in 2015) tend to marry later than previous generations. This has negatively affected millennial homeownership.

Marital status - millennials vs. other generations.

2. Increasing racial diversity in millennials

Millennials are far more racially diverse than previous generational cohorts. 40% of millennials belong to racial and ethnic minorities.

Racial and ethnic composition - millennials vs. other generations.

However, because to structural factors (redlining during the New Deal Era, lack of intergenerational wealth, etc.), minority homeownership has always been lower than their White counterparts.

This homeownership gap continues to this day.

Homeownership rate - white vs. minorities.

3. Increasing student loan debt

Outstanding student loan debt has increased fourfold in the space of 15 years – from $481 Billion in 2006 to $1707 Billion in 2020.

Millennial homeownership has suffered due to a rise in student loan debt.

4. Decreasing access to credit

Poor lending practices by banks in the early 2000s led to a wave of defaults and foreclosures during the Great Financial Crisis. Banks and other lending institutions seem to have learnt their lesson. Credit availability in 2021 is very low.

While stringent underwriting practices reduces the risk of defaults, it also makes it more difficult for millennials to purchase their first home.

Mortgage credit availability.

5. Millennials are getting increasingly rent burdened

Millennials are far more likely to be rent-burdened (spend more than 30% of their income on rent) than previous generations.

Rent burdened households.

Reasons for optimism

Researchers at Urban Institute predict that Millennials and Gen Zs will increase their homeownership rate from 46% in 2020 to 64% in 2040.

Thus, young generations will drive demand for homes over the next 2 decades. They will boost homeownership and home prices in the process.

Millennial and Gen Z projected homeownership rate.

Home.LLC aims to help millennials purchase their dream home. Head over to our website if you need assistance reaching 20% down.

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Sid Samant

Sid loves building models at the intersection of economics and data analytics to help you buy your dream home. He fell in love with data science after working with big data in telecommunications. He has an MBA from NMIMS University and reads voraciously in his spare time. He is a long-suffering supporter of Arsenal Football Club. He also believes that The Wire is a better show than both The Sopranos and Breaking Bad.

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