Millennial homeownership is low because millennials are waiting longer than previous generations to own a home.
The low millennial homeownership rate has been the subject of several theories. Low millennial homeownership perplexed the real estate and lending experts for the past few years.
Theories suggest millennial homeownership is low because of high home prices and fear over the last housing crisis.
But now, the Urban Institute released a study that shows the actual data behind these factors.
The millennial homeownership rate was 37% in 2015. Gen Xers and Baby Boomers had a 45% homeownership rate when they were ages 25 to 34.
Five Factors That Have Kept Millennial Homeownership Low:
1. Delayed marriage:
Delaying family formation is, in fact, a hindrance to homeownership. Being married increases the probability of owning a home by a full 18%.
2. Greater racial diversity:
White households have the highest homeownership rate by-far, therefore the increasing diversity within the Millennial population also contributes to the lower homeownership rate. The Millennial homeownership rate would be 2.6% higher If the racial composition remained the same in 2015 as it was in 1990,
3. Increased education debt:
Student debt has been a growing problem, and could even be turning into a crisis. But how much does it affect homeownership rates? The Urban Institute’s data shows a 1% increase in student debt decreases the likelihood of owning a home by 0.15%.
4. Increased rents:
Nationwide, rent just jumped to a new all-time high, surpassing an average $1,400 per month. Data shows that a 1% increase in a household’s rent-to-income ratio decreases the likelihood of homeownership by 0.07%.
5. Delayed childbearing:
Not only are Millennials taking longer to get married, but they are also spending more time before having children. For those who are married, having a child increases the probability of owning a home by 6.2%.
Another important factor to Millennial homeownership includes parental wealth and homeownership status. For any generation, a child’s likelihood of being a homeowner increases by 9% if their parent is a homeowner. Also, a 1% increase in parental wealth increases the child’s likelihood of being a homeowner by 0.016%.