In 2015, the homeownership rate for 25-34 year old’s – millennials – was just 37%, around 8 percentage points below the two previous generations at that age; resulting in 3.4 million fewer owners.
A new study from the Urban Institute digs deep into why the millennial homeownership rate is so low.
Among the factors that is shows are impacting the rate are delaying marriage. The study calculates that if the marriage rate in 2015 was the same as it was in 1990, the millennial homeownership rate would have been around 5 percentage points higher.
Greater racial diversity is another factor impacting homeownership among millennials. Non-Hispanic white households have higher homeownership rates than all other racial groups and the millennial generation has increasing diversity. If diversity in 2015 matched that of 1990, the homeownership rate would be 2.6 percentage points higher.
Between 2000 and 2015, black homeownership rate fell by 9.7%, significantly higher than the drop in the homeownership rate of three race/ethnic groups during this period. Only black households did not experience an increase in homeownership during the housing boom.
Student debt, location choices also impact ownership
Increased rent, student debt, delayed child bearing, and parental wealth and homeownership status, all have an impact on homeownership rates.
There is also an affect from millennials choosing to live in more expensive urban centers.
The study was funded by a grant from Better Mortgage, whose CEO and co-founder Vishal Garg says it is vital to understand the challenges facing homebuyers.
“The Urban Institute findings prove our hypothesis that Millennials are not as involved in homeownership and unless we tackle this now they’re at risk of becoming a ‘financially lost generation’,” he says.
Lenders, officials need to do more
Garg adds that the mortgage industry and other stakeholders need to do more to help boost homeownership among millennials.
“The private sector needs to play a more active role in advocating for change, rather than waiting for inventory to free up or the rate environment to shift,” added Garg. “We will continue to work with public officials and institutions to discuss policy recommendations, and we call on private institutions to join us in educating the public and confronting issues, like financial discrimination, head on.”
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