According to the US Census, home ownership plummeted following the financial crisis of the mid-aughts. However, significant improvements in the job market in recent years are starting to indicate ownership is back on the rise.
The values, attitudes, and needs of millennials have changed in the past few years from being seen as lifelong renters to now potentially driving the homeownership economy. While the vast majority of homeowners are still aged 65 years and older, there has been a market improvement in the under-35 demographic. Today, the US Census shows 36 percent of people within the under-35 age group now own their homes. This figure is up substantially from 31 percent in 2015.
As the economy recovers millennials are coming of age
Millennial home buying trends are changing along with the economic climate we live in. What they once considered to be an unwise or unnecessary investment is now viewed differently. As the economy continues to improve from the great recession, real estate is gaining ground once again as a viable long-term investment. Furthermore, macroeconomic stats like a 4.0% unemployment rate also offer a sense of security to millennials who are considering a home purchase.
According to the Home Buyer and Seller Trend 2017 report published by the National Association of Realtors, millennials represent the highest share of home buyers across all demographics. 66 percent of this group were first-time buyers.
Millennials are coming of age, starting families, and thinking about their future, dispelling the myth that their generation is doomed to be renters for life. The reality is, millennials are the sole reason that homeownership has increased in the past year.
Some cities, more than others, have seen a significant increase in homeownership that can be attributed to millennials. To the surprise of many analysts, at the top of that list, Birmingham, Alabama, saw the biggest uptick, with the millennial market share going from 11.9 percent to 18 percent in just a year. Studies show that of the 50 top real estate markets in America, 33 experienced millennial-driven increases. All things considered, we can probably consider the millennials-as-renters assumption a thing of the past.
Why are millennials now choosing to buy?
Unemployment is down, wages are up. The economy is booming. However, adding to the attraction of ownership may well be soaring rents and the veritable lack of available rental properties – the exact situation that kept many millennials in their parents’ basements for so long. Zillow reports that rental prices are rising at their fastest pace in 2 years. This is driven in large part by a 95% rental occupancy rate nationwide.
However, as this generation matures and the economy continues to turn around, attitudes are changing, and with them, the decisions that are made with regard to the future.
The fact that many millennials lived through the financial and mortgage crisis is no small factor, either. Some may have seen their parents lose their homes and decided early on that they were never going to get themselves into that situation. This alone may have created a delayed response and perhaps an aversion to the perceived risks involved in owning a home.
For millennials, buying a home is not necessarily a financial decision
Though the vast majority of millennials currently think buying a home is a good financial decision, their reasons for buying over renting go beyond mere investment.
In the past, millennials have focused on education and career building over raising a family or owning a home. Now that many of this group have accomplished these goals, they are looking toward the future and approaching it with a renewed sense of purpose.
By all accounts, there is no guarantee that buying a home will provide a bullet-proof source of investment over the long-term. The current value bubble will likely burst, and currently, the potential return on roughly the same amount you might invest in a down payment would probably deliver more value if invested in the stock market. The housing market is just now starting to recover after the crash in 2011. Were that to happen again, homeowners may well end up owing more than their house is worth.
So, if not for financial reasons, why are millennials now buying instead of renting? The answer lies in the archetypes that exemplify this group in the first place – emotions. Owning a home is a chance to gain privacy and freedom. It is an opportunity to completely control their living space and their lives. They can change the look and feel of the place as it suits them and they are willing to pay for that privilege.
Homeownership addresses a lot of human needs that go well beyond investment. Some of these reasons include:
- Having a place to raise a family
- A sense of permanence
- A social status symbol
- A source of security
- Rent represents money “gone forever” while mortgage payments build savings
- A chance to transform a place into a real home of your own
Simply put, homeownership among millennials is answering a desire to achieve the big picture, find lasting satisfaction, and to create something lasting for themselves and their families.
In conclusion, it seems that we can finally put the myth of millennials-as-renters-for-life to bed. As with most aspects of our economy today, times and attitudes are changing. It stands to reason that the younger, future-focused generation should change right along with it.