NAR Publishes “Field Guide to Millennial Home Buyers”
When it comes to the question of how to put America’s housing market firmly back on its pedestal, the pressure is clearly on the Millennials. That’s the group of individuals also referred to as Generation Y, who fall into the age range of 18 to 34. However, according to this year’s annual report from the Joint Center for Housing Studies of Harvard University (JCHS), the group is slower to buy into the “American Dream” of home ownership.
In light of factors such as the housing crisis, hefty college loan debt, and a less than robust economy, it’s not surprising that young adults are exercising caution. In fact, such topics have led Millennials to view the long-term investment of home ownership a bit differently than previous generations.
In an effort to understand how to appeal to the Millennials and develop effective marketing strategies to get them on board, the National Association of Realtors (NAR) recently culled a variety of sources and came up with its “Field Guide to Millennial Home Buyers.” The guide consists of numerous links to articles on this phenomenon from some of the nation’s most well-respected news sources, including The New York Times, The Brookings Institution, Pew Research, and U.S. News and World Report.*
Here is a quick overview of the unique obstacles and characteristics that individuals in this generation share – specifically when it comes to what may shape their attitudes towards home ownership:
- 40 percent of the nation’s 25-year olds hold an average balance of $25,000 in student debt. There are around 40 million student loan borrowers annually.
- Tighter lending guidelines have made it more difficult for 25 to 30 year olds to qualify for a home loan. According to the Federal Reserve Bank of New York, “In 2005, nearly 9 percent of 25 to 30-year-olds with student debt were granted a mortgage. In 2013, that percentage dropped to slightly above 4 percent.” One of the firm’s senior economists, Donghoon Lee, noted, “Prior to the burst of the housing bubble in 2008, most borrowers were granted mortgages more easily, including those with a high amount of student debt.”
- Lower interest rates have not been enough to convince this generation to take the plunge into home ownership.
- Millennials who live in the largest metro areas of the U.S. could afford to buy homes, but are opting to live with their parents. The JCHS survey found that among Gen Y members living in larger cities who have the funds to purchase a home, 30 percent cited low pay, continuing high unemployment rates, and fear of another housing market crisis as reasons preventing them from doing so.
- The JCHS survey revealed that many Millennials might be able to swing a monthly mortgage, but find the typical home down payment out of reach.
See related post, “Can I Buy a Home Without a Down Payment?”
See related post, “Millennials Less Likely to Default on Mortgages than Any Other Age Group.”
- They are hindered from saving up for a down payment because of other loans and expenses, such as automobile payments, college tuition, and health insurance.
- A Pew Research study discovered that 1 in 4 Millennials or 23.6 percent live in multi-generational households. Responsibilities tied into such situations account for a lack of upward mobility and financial freedom.
- By 2020, this group will account for 1 in 3 adults in the U.S.
- The U.S. workforce will consist of 75 percent of individuals from this group by 2025.
- In a 2014 paper from USC’s Annenberg School Center on Communications and Leadership Policy, among Millennials, 89 percent expressed a stronger likelihood that they would buy from companies that supported solutions to specific social issues.
- This group accounts for more that $1 trillion in U.S. Consumer spending.
- 87.5 percent of the Gen Y respondents surveyed disagreed with this statement: “Money is the best measure of success.”
- 64 percent of Millennials would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring.
- Among investors aged 21 to 36, 52 percent keep their savings in cash, compared to 23 percent for other age groups.
- For employed Millennials, their dream job would be at one of the following: Google, Apple, Facebook, the U.S. State Department, and Disney.
- This is also one of the most adept generations where IT, computers and social media are concerned.
- In analyzing all of the factors at play that have made Gen Y hesitant about buying property, a JCHS spokeswoman, Kerry Donahue reflected, “This age group is a group of people who just watched the foreclosure process happen, so they might be a little more gun-shy then their predecessors were.” Several of the study’s researchers added that although Millennials are delaying home buys, it is in most of their long-term plans.
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