Buying and owning your own home used to be a huge part of the stereotypical American Dream. A big front yard, white picket fence, two-story house — it almost sounds too good to be true. Unfortunately, for many millennials, that dream has been forced to change over the years. Millennials just aren’t buying houses the way previous generations did, and there are several reasons why.
In 2016, the homeownership rate in the United States fell to 63%. That’s the lowest it’s been in over half a century, and a big part of the drop has to do with this generation of home buyers.
So, why is the state of home ownership changing so much? How are millennials influencing it, and what are they doing instead of buying houses? Let’s take a look at how this generation has made such an impact on the housing market.
Waiting to Put Down Roots
One of the biggest reasons millennials aren’t buying houses at the same rate as their parents is because they aren’t settling down as early in their lives. For starters, many are waiting longer to get married and put down roots. The average age for men getting married in the United States is currently 29.8 years. Compare that to 1920, where the average marrying age was just 24.6 years.
There are many reasons for this kind of waiting. Some people have an uneven balance of debt and they don’t want to take on another person’s financial responsibilities. Others have different financial goals or don’t want to deal with the pressures of conflicting ideas about the future.
Instead of moving in with a partner or spouse, more and more millennials are choosing to have roommates or to buy a house with friends to help with the hidden costs of homeownership. This takes a lot of trust in the people you choose to have as roommates since you’ll end up sharing the responsibilities of a mortgage, but it’s a great way to save money while still owning a part of your own place.
The Financial Burden of Homeownership
Perhaps the biggest reason many millennials aren’t buying houses is simply that they can’t afford them. Poverty within the US continues to grow, and has moved from the city to the suburbs thanks to things like a lack of job availability and not enough federal programs that can assist those in need. According to the 2015 census bureau, there are over 43 million people currently living in poverty in the United States. With fewer affordable housing programs available, many millennials don’t even bother looking into homeownership.
Even if they do, they often get deterred by all of the underlying hidden costs that can come with owning a home. It’s about more than just making a downpayment and paying a monthly mortgage, after all. Hidden costs can include everything from add-ons to the home, to lawn care and maintenance, property taxes, and even mortgage insurance. People end up discovering things about their homes that constantly cost money, and many millennials don’t have the financial stability in their lives to take that kind of risk. Unless they have extra funds in their budget, these unexpected costs can quickly take a toll on any homeowner.
For a single millennial who might not be able to get a good job and who isn’t married, it often doesn’t make sense to buy a house on a single-person income. This is often especially true for those who have student loan debt knocking on their door. With the average student graduating college with almost $30,000 of debt, buying a house doesn’t always feel like a top priority.
Alternative Housing Solutions
Because it isn’t always feasible to buy a house, many millennials are looking toward alternative housing solutions. One option for those who aren’t able to make a downpayment on a home is to rent a place instead of buying one. Renting allows flexibility and tenants don’t have to worry about things like maintenance or paying property taxes. If they have to, tenants can always break a lease, too. It isn’t as easy to get out of a mortgage.
If you do want to own your own place, some popular alternative housing solutions include tiny homes, yurts, mobile homes/RVs, or even modular homes that often cost 10-20% less than stick-built houses. There are options available that can fit your budget, you just might have to think outside the box.
For millennials, owning a home might still be a part of the American dream. But, it might not be a part of the American reality – at least until they’re older and more financially stable and ready to settle down.
Thanks to debt, housing costs, and a poor job market, more millennials are living at home with their parents than ever before. As a result, the entire spectrum of homeownership is changing, and it shows no signs of switching back to the way things once were any time soon.