Photo: Robert Clark
Many real estate experts have blamed the historically low homeownership rate on the glaring absence of Millennials in the housing marketplace — even as many Millennials are aging into their prime homebuying years.
After hitting a 50-year low in July 2016, the US homeownership rate has been slowing inching upwards ever since.
Nearly one third of all homebuyers last year were Millennials — a new high for the generational group. Millennials were the “most active” generational group of homebuyers for the fifth year in a row in 2017, according to a recent survey conducted by the National Association of Realtors (NAR).
And while the number of overall Millennial buyers is growing, it is still “underperforming.” In other words, many Millennials are looking, but they’re not buying. Rapidly rising home prices in the starter home market (due to severely constrained inventory) have left many Millennials priced-out.
“These challenging market conditions have caused – and will continue to cause – many aspiring Millennial buyers to continue renting unless more Gen Xers decide to sell, and entry-level home construction picks up significantly,” NAR Chief Economist Lawrence Yun said in the survey’s digital release.
But renting may soon prove to be increasingly more difficult for some Millennials as well. Rents were up annually in 85 of the top 100 metro areas, which tend to be “Millennial magnets,” and nine of those metro areas posted double-digit annual rental price appreciation in March.
In a recent study conducted by the listing site RentCafe, it was estimated that Millennials spend about half of their income on rent while they’re in their twenties — substantially higher than previous generations. This makes saving for a downpayment especially challenging, on top of repayment of student loans and daily living and commuting costs.
Unsurprisingly, many Millennials turn to the bank of Mom and Dad for help with escalating housing costs, as national wage growth remains stagnant. Some eight percent of Millennials have fessed up to getting help from family to pay their housing costs — and of those that received assistance, nearly 20 percent accept $8,000 or more from family for their housing costs. That’s according to a study by the listing site ApartmentList.
The monetary handouts aren’t just a quick fix, but more a means to a better end.
“The thousands of dollars per year parents contribute to their children’s rent allows Millennials to live in apartments they wouldn’t be able to afford, pay off student loans quicker, or save for a downpayment,” says Apartment List in the report.
And with over 70 million Millennials nationwide, their entry into the marketplace will shape the housing market for years to come — when they can finally afford to break into it.