Home Sweet Rental?


One of the missing pieces of the housing recovery has been a lack of first time homebuyers. Once income and credit improve, will Millennials step up, or will student debt and preferences keep them out of the market? 

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

EUR/USD weakens to near 1.1900 as traders eye US data

EUR/USD weakens to near 1.1900 as traders eye US data

EUR/USD eases to near 1.1900 in Tuesday's European trading hours, snapping the two-day winning streak. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.

GBP/USD stays in the red below 1.3700 on renewed USD demand

GBP/USD stays in the red below 1.3700 on renewed USD demand

GBP/USD trades on a weaker note below 1.3700 in the European session on Tuesday. The pair faces challenges due to renewed US Dollar demand, UK political risks and rising expectations of a March Bank of England rate cut. The immediate focus is now on the US Retail Sales data. 

USD/JPY drops toward 155.00 as focus shifts to US data

USD/JPY drops toward 155.00 as focus shifts to US data

USD/JPY meets fresh supply and inches closer toward 155.00 in the Asian session on Tuesday. The Japanese Yen holds the upper hand over the US Dollar after Japanese Prime Minister Sanae Takaichi led the ruling Liberal Democratic Party to a historic landslide win and on intervention talks. Traders brace for key US economic data that could offer more clues on the Federal Reserve's monetary policy.


Editors’ Picks

EUR/USD weakens to near 1.1900 as traders eye US data

EUR/USD weakens to near 1.1900 as traders eye US data

EUR/USD eases to near 1.1900 in Tuesday's European trading hours, snapping the two-day winning streak. Markets turn cautious, lifting the haven demand for the US Dollar ahead of the release of key US economic data, including Retail Sales and ADP Employment Change 4-week average.

GBP/USD stays in the red below 1.3700 on renewed USD demand

GBP/USD stays in the red below 1.3700 on renewed USD demand

GBP/USD trades on a weaker note below 1.3700 in the European session on Tuesday. The pair faces challenges due to renewed US Dollar demand, UK political risks and rising expectations of a March Bank of England rate cut. The immediate focus is now on the US Retail Sales data. 

Gold sticks to modest losses above $5,000 ahead of US data

Gold sticks to modest losses above $5,000 ahead of US data

Gold sticks to modest intraday losses through the first half of the European session, though it holds comfortably above the $5,000 psychological mark and the daily swing low. The outcome of Japan's snap election on Sunday removes political uncertainty, which along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood. This turns out to be a key factor exerting downward pressure on the safe-haven precious metal.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.

Follow the money, what USD/JPY in Tokyo is really telling you

Follow the money, what USD/JPY in Tokyo is really telling you

Over the past two Tokyo sessions, this has not been a rate story. Not even close. Interest rate differentials have been spectators, not drivers. What has moved USD/JPY in local hours has been flow and flow alone.

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