New Living Arrangements
The widely documented employment, income and debt struggles of Millennials has generated concerns over the ability—and willingness—of this generation to contribute to the housing market’s recovery. Homeownership among adults under the age of 35 has sunk to 36.8 percent from a peak of 43.1 percent in 2004, with a historically low share of home sales going to first time buyers. Many of the hurdles that have kept Millennials from homeownership and in rentals, including weak income growth that has hindered saving and uncertainty over job prospects, have also kept them living at home with parents (top chart).Different and Yet the Same
Millennials’ retreat from the housing market comes, of course, as mortgage credit has been inordinately tight. But after having come of age in the financial crisis and housing bust, will Millennials be willing to get into the market once credit and income conditions improve?Millennials have been touted as a highly mobile generation, and in a 2013 survey by Fannie Mae, 19 percent of renters age 18-39 noted the primary reason for renting was flexibility (middle chart). Another 23 percent of young renters reported affordability as the number one reason, an increase from 2012 following a rapid rebound in home prices. Yet the most common reason for renting was that respondents were not financially ready for homeownership (26 percent), with another 8 percent noting they cannot obtain a mortgage.
As has been frequently noted, one hallmark of this generation is the pervasiveness of student debt. Research has found that student loan debt has contributed to the rise in young adults living with parents and weighed on the homeownership rates of student loan borrowers.
However, student loan debt looks more prone to delay, not derail, homeownership for most Millennials. According to a Wells Fargo survey on Millennials published last June, if not paying off debt, Millennials’ biggest financial priority is purchasing a home. In addition, although student loan borrowers tend to have lower rates of homeownership than similarly educated households without a history of student debt, those homeownership rates nearly converge by the ages of 35-39.
Moreover, young people are also pushing back the age at which they first marry or have children (bottom chart). These major life events are likely to accompany a willingness to settle down in a particular locale and commit to a longer-term housing arrangement. The vast majority (90 percent) of young renters still intends to buy a home at some point in the future, suggesting the dream of homeownership is still very much alive. For most Millennials, it is just likely to come true later in life.
Editors’ Picks
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518.
EUR/USD mired near 1.0730 after choppy Thursday market session
EUR/USD whipsawed somewhat on Thursday, and the pair is heading into Friday's early session near 1.0730 after a back-and-forth session and complicated US data that vexed rate cut hopes.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.
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