A survey conducted by the National Association of Realtors shows that 60 percent of first time home buyers that are having a difficult time getting a mortgage are millennials, thus separating them from previous generations of first time home buyer. This divide is not because millennials do not have a desire to own their own property. Rather, this phenomenon is the result of various factors, such as a competitive housing market, the difficulty in securing a down payment on a home, and the rising popularity of renting homes.
Millennials entered the workforce during the worst recession in recent American history, which made it difficult for them to establish their credit in the real world and save up enough money for a down payment. Many millennials faced the problem of achieving upward movement in the fields they chose to enter, further stalling their long-term plans. While previous generations were able to settle down earlier and invest in property, millennials are finding it harder to settle down with so many factors in their lives still up in the air.
Furthermore, debt is a huge factor leading to the millennials’ current role in the housing market. Since the U.S. Federal Housing Administration required student debt to be factored into determining if someone may receive a loan or not, the availability of loans for young homebuyers has significantly been impacted. The average American, under the age of 40, has average student loans of $27,000 – making it very difficult for them to qualify for a mortgage. Plus, the recession of 2008 meant that millennials were often witnessed the struggles of their parents as they worked to make ends meet in house payments, making owning a home seem like a costly and risky investment.
Due to these many issues, many millennials have turned to rent homes instead. At first, the idea seems beneficial to the ever-restless group- no commitment, homes in urban areas, affordable payments. Yet, in the long run, renting a home or apartment could be a financially costly choice as it does not offer any return on payments.
Owing to their lack of financial literacy, millennials do not often understand this trade-off and so lose too much before they choose to settle down into owning property. Especially when considering that rent rises at about 15 percent per year while renters’ income rises at only 11 percent, slowly draining millennials over a period of time.
While it may seem scary to own property, there are resources out there for millennials hoping to overcome their obstacles. Answering any questions you have about student loan forgiveness, Goodbye Loans promises to help any first-time home buyer understand their options and find their way to owning their own property.