Top 5 reasons Millennials are not buying homes – yet

Coming out of the last housing crisis – can you believe we’re at the 10-year mark? – an urgent priority for the housing industry was to expand the market by getting more Millennials to buy homes. For the first nine years, that vision has not exactly panned out. Last year, Millennial homeownership rate dropped to the lowest level recorded in over 5 decades. As the economy improved and as Millennials continue to age, earn more, and start their own families, that dismal figure has rebounded to the current 35.3%, but it is still near 10 percentage points lower than a decade ago.

It has been reported and dissected in depth that affordability is the biggest barrier to homeownership, not a lack of desire to buy, especially among older Millennials. In ValueInsured’s Modern Homebuyer Survey, findings consistently show 8 in 10 non home-owning Millennials express a desire to become homeowners. So, desire is indeed there. But we also know, average student loan debt for a Millennial graduate today has also doubled what it was a decade ago. And, while Millennials have seen their wages increase, it is nowhere near the 7-15% annual home price growth rates for top metro markets where many Millennials try to live and grow their career.  This all adds to the affordability issue.

In addition to affordability though, other concerns - such as job future and the need for flexibility - are also reasons that delay Millennial homeownership, according to ValueInsured’s latest Modern Homebuyer Survey, conducted in October 2017:

  • When asked why they have not yet pulled the trigger to buy their first home, 64% of all Millennials who wish to buy “in the near future” say it is because they lack the confidence they can afford the down payment on a home they would like to own.
  • 47% say they cannot make the commitment right now as they worry their job future is uncertain.
  • 36% say they do wish to buy in the near future, but at the present time want to keep their options open.
  • 30% think they will move soon for their job, and would like to wait and see where their next move takes them before making a home purchase commitment.
  • 21% say they have not pulled the trigger to buy despite wishing to do so because they still enjoy the flexibility of renting.

Job concerns – and presumably the concerns for a sudden change in income that would affect their ability to fulfill their mortgage responsibility – immobilize nearly half of all Millennials who wish they could buy a home soon. This makes sense as most Millennials are still early in their career and their average job tenure is only 2.8 years according to Bureau of Labor Statistics.

The survey results also provide a glimpse of tension Millennials deal with as they try to transition from one life stage to another. At least one-third wish to settle down for homeownership soon as well as keeping their options open, and at least 1 in 5 want to enjoy the best of both worlds of owning and renting.  

Another interesting finding is that only 11% of all Millennials who wish to buy a home in the near future cited “low or free rent” as a reason they have yet to pulled the trigger to buy. Perhaps this should not surprise anyone given the high rents in many parts of the country, paying for a monthly mortgage is not necessarily more expensive than paying for rent. It suggests that for majority of Millennials who want to buy, the down payment, not the monthly mortgage payment, is the more challenging affordability barrier that keeps them on the sidelines.