A majority of first-time homebuyers is the millennial generation, a demographic born between the early 1980s and early 1990s, and also one that is enduring a lot of suffering: record student loan debt, high consumer debt levels and a questionable labor market.
A new study also suggests that the number of first-time homebuyers has descended to the lowest level since 1987. According to a report by the National Association of Retailers (NAR), the percentage of home purchases by first time buyers declined to 33 percent for the 12 months through June, down from 38 percent a year ago.
One of the reasons for this paucity of home acquisitions is the less than modest growth in wages, which only grew two percent in the 12 months through September. Rising renting prices is also a major excuse for not purchasing a home since a monthly rental unit can diminish an individual’s cash flow to set aside for a down payment.
“Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” said Lawrence Yun, the NAR’s chief economist, in a statement.
“Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums. Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation.”
The Great Recession has been a tremendous burden for this age demographic as they have been straddled by debt, low-paying jobs and a rising cost of living. This is a recipe for fewer assets. Furthermore, millennials tend to have lower credit scores than their older counterparts, which then hurts their chances of obtaining a mortgage.
Ostensibly, millennials will continue to live at home with their parents.
Here is what CNN Money wrote in September:
“Thanks to a sluggish job market, heavy student loan debts and tight lending standards, Millennials are moving out of their folks’ homes at a snail’s pace. In 2014, 31.1% of 18- to 34-year-olds lived with their parents, down slightly from 31.2% a year prior.
“What paints an even grimmer picture is that those who do manage to leave mom and dad’s place aren’t moving out to form their own households, said Jed Kelko, Trulia’s chief economist. Instead of renting or buying a home, they are bunking with friends, siblings or other relatives.”
In other words, housing is dead, at least for millennials.
Eugene Patrick Devany says
Since 1995 the middle class lost 8% of their share of family wealth and the poorer half lost 70% of their wealth. Young people can’t afford to marry and certainly can’t afford a home. We need full employment to increase salaries and that requires a replacement of the job killing, wealth destroying payroll taxes.