deciding where to buy

Can the Housing Market Put Millennials in Risk of Lower Lifetime Wealth?

1 in 3 millennials own a home and while that may sound promising, that statistic is alarming many because millennials are 8%-9% behind previous generations’ home ownership rates. Those stats don’t tell the full story, but looking more closely, here’s the bigger picture.

The largest current home buyer generation is millennials. As most of this generation settles into their careers post-college and start families, purchasing a home may seem like a logical next step– and for many it is. In fact, 1 in 3 millennials own a home and while that may sound promising, that statistic is alarming many because millennials are 8%-9% behind previous generations’ home ownership rates.

Those stats don’t tell the full story. According to Urban Institute study on millennial home ownership, minority households have a homeownership rate a staggering 15% below lower than white households. Arguably one of the most educated generations, and yet highly educated millennial home ownership dropped 5% compared to previous two generations. Across the board, it’s clear the largest home buyer generation is lagging, and it could profoundly impact their lifetime wealth and future retirement.

Why The Current Real Estate Market May Put Millennials In Jeopardy of Lower Lifetime Wealth

It’s important to understand why millennials are lagging their predecessor generations. The why is complex and varied, but increased student loan debt, lack of affordable housing, down payment struggles, and delayed marriage have all been contributing factors to delayed home ownership in millennials. And with delayed home ownership comes long term collateral effects for millennials. For example, when baby boomers hit a median age of 35 in 1990, they owned almost 1/3 of American real estate. Today’s millennials are far from that benchmark, owning only 4%.


deciding where to buy

The Impact On Millennial Long-term Wealth

Jenny Schuetz, a housing policy expert, explains that millennials will have a “lower lifetime wealth.” With real estate being one of the chief wealth builders, millennials are missing out on the benefits of real estate appreciation. Instead, they’re paying inflated rent prices, drowning in student loan debt, or even living in their parents’ basements—more than any other generation in 130 years.

Shockingly, only 28% of millennials believe they can own a home— without an inheritance. That means, almost 3 out of 4 millennials would need an inheritance to ever buy a home, or to ever experience the benefits of real estate appreciation, capital gains exemption, and long-term wealth.

Millennials and Retirement: Houston, We Have A Problem

The largest concentration of millennials is in the US. Their spending habits, or lack thereof, can and will have a dramatic effect on our economy either positively or negatively. Shockingly, millennials are earning less than similarly aged individuals a decade ago. According to Urban Institute’s “Retirement Security in 2050,” the poverty rate among retirees (today’s current millennials) is projected to increase to 30%. Almost 1 in 3 millennials will retire in poverty. Millennials, the generation that graduated college and entered the work force mid-recession while strapped with staggering student loan debt, started behind the eight ball, and for many, they haven’t recovered.

This Isn’t Just A Millennial Problem

A projected $13.5 trillion in housing inventory is projected to enter the real estate market thanks in part to baby boomers aging out of home ownership, but the question remains– who can buy them? As millennials continue to struggle with saving for down payments, eradicating student loan debt, and affordable housing- we may see a shift in the housing market. We may see available inventory and not enough buyers. Many baby boomers are aging out of larger, more expensive homes– homes that millennials don’t want and can’t afford. As these larger homes enter the market, their days on the market and final sales price may not be good news for the real estate market. Millennials are known for bucking the system– if and when they do buy, you can expect them to buck at larger, older homes with staggering price tags.

How To Remedy The Millennial Problem

The single greatest hurdle for millennials, according to millennials, is money. Saving for a down payment is simply not feasible with their student loan debt. While not all parents are capable, gifting funds can help open the doors to homeownership for thousands of millennials. For those that don’t have parents or grandparents gifting money for a down payment, there are numerous programs available to assistance with down payment and closing costs.

As we enter another political season, chatter about student loan reform is fresh on the campaign trail. From candidates promising total eradication of student loan debt to incentive programs, something must be done to address the student loan crisis. Voicing your concerns and suggestions to your senators is a vital step in student loan regulation.

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Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She's passionate about the power of real estate. She's also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

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