Millennials Can’t Afford to Buy Houses Now And Maybe Not Ever
Settling down and buying a home is not as easy for the generation of millennials as it was for baby boomers or those that came after. Today, millennials are becoming homeowners less and less. Some delay homeownership until they are married and marrying later, some have too much student debt, some are deciding to rent forever, and others simply cannot afford it in today’s economic conditions.
The baby boomers have the highest rate of ownership in the United States with 80% of them being homeowners. This is a stark difference from millennial’s ownership being 1 in 3 for those who are under 35. This is not to say they will eventually catch up. Although it is difficult for many to afford homeownership at the moment the new trend for future generations and millennials may just be a delay in ownership, unlike baby boomers.
Another reason many have decided to put a pause on pursuing homeownership is due to wanting to wait until they are married. Not only are they waiting until they are married, but many millennials are also taking a longer time than earlier generations to tie the knot. Both men and women on average are waiting till they are almost 30 to get married which means a delay in buying them forever home. When comparing them to adults of the 1960s where they were commonly married in their 20s makes for a late start on setting down roots.
Student debt is another major factor for the avoidance of homeownership for many millennials. Buying a house many times requires giving a significant amount for the down payment. This means savings for many years. But with student loans being more and more necessary to attend college, saving can be easily delayed. Not only do millennials have a lot of student debt, but these loans also have very high-interest rates which put pressure on them to pay them off as soon as possible. Although it can be possible to save while paying down debt it is an obstacle and delays the buying process.
Potential solutions to helping millennials become homeowners include canceling student debt which is something many have been asking for from politicians and the government. President Joe Biden often heard these pleas and made it one of the focal points during his presidential campaign. Right now the pressure is on for the president to follow through and help so many Americans and millennials in particular with canceling their debt. This would make it easier for many to have the ability to save up for their future homes and purchase sooner than later.
There is also a select amount of millennials who are opting out completely from buying a home and rather deciding to rent for the rest of their lives. Of the current millennial renters, 12% plan to keep on renting. Almost 70% of the millennials surveyed said that they do not have the financial ability to buy a home. On one hand, having a generation who plans to always rent is good for landlords across the country but will this harm the economy when there are no longer people buying homes? Or will the market change and start to be made up of just renters? These are trends to pay attention to for the future.
One other reason that is impossible to ignore in this country when it comes to the lack of affordability of purchasing homes is the federal minimum wage. According to the U.S. Department of Labor, the current federal minimum wage is $7.25 and has not gone up since 2009. This means that other factors such as the cost of living have gone up, wages have not. There is no doubt that the minimum wage and cost of living go hand in hand when it comes to people being able to afford to house. This not only affects the college-educated but also affects those without college degrees even more so. Over the last 50 years, the younger generation of worker’s earnings has relatively remained stagnant, according to Pew Research Center.
Although President Biden’s COVID-19 relief plan included raising the federal minimum wage to $15, almost doubling it as it stands now, he now believes that it will not be able to go into effect. This is devastating not only for millennials who barely can afford the cost of living but for Americans across the nation. Raising wages is a solution that would help with millennial’s ability to become homeowners but things are looking grim as of the president’s latest update.
There needs to be a lot of changes in federal and local governments to help millennials catch up to their parents and previous generations. It is the hope of many that with the new president there will be positive changes to help millennials and all Americans move in the right direction of one-day becoming homeowners.
