Why on earth are Millennials not buying homes? It turns out there are pretty straightforward reasons behind their absence.
The housing market has, thus far in 2014, been putting up some pretty lukewarm numbers, and the relative absence of Millennials – aka the 77 million Americans born in the 80s, 90s and early 2000s – has received the lion share of blame.
But why are Millennials finding it so hard to break into the marketplace? The reasons, it turns out, are quite simple and straightforward:
1. Crappy Job Market – The unemployment rate for 18-to-29-year-olds was a whopping 9.1 percent in April, which is nearly 50 percent higher than the national average; if you factor in Millennials who gave up looking for work, the number is an even worse 15.5 percent. Here’s another heartwarming stat – 29 percent of adults younger than 35 currently live with their parents.
2. Crappy Savings – Clearly, it will be difficult to attain a mortgage if you’re unemployed or working at Target and living with your parents, but will also be difficult to save the necessary funds for a downpayment; after all, even a 3.5 percent downpayment represents a pretty hefty chunk of change for most homes. Think, 3.5 percent of a $100,000 home is $3,500; it’s difficult to save such a sum on the minimum wage.
3. Crappy Credit Scores – Required credit scores for prime loans remain quite elevated, which automatically eliminates most Millennials from competition. According to a report by Experian that Amy Hoak of MarketWatch cited, the average VantageScore credit score for Millennials is just 628, compared to 653 for Generation X, 700 for Baby Boomers and 735 for the Greatest Generation.
4. Crappy Student Loan Debt Loads – We’ve written about student loan debt on numerous occasions, and for good reason – 71 percent of college graduates in 2012 (or 1.3 million people) had student loan debt, an incredible increase of 400,000 students from 2004; and to make matters even worse, the average debt load for students was $29,400 in 2012, up 25 percent from 2008. Per new Dodd-Frank regulations, debt-to-income cannot exceed 43 percent for qualified mortgages, and lingering student debts could make that number a difficult one to reach for many consumers.
5. Crappy Family Formations – Finally, all those various factors go into very low family formations, which have fallen precariously since the mid-20th century. Case in point: the current median age of married men and women is 29 and 27, respectively, which is up from 24 and 21 in 1950; similarly, not only has the average age of first-time mothers increased from 21.4 in 1970 to 25.8 in 2012, but first-birth rates have risen for women aged 30 to 39.