The millennial generation has been dubbed the generation that is not interested in purchasing a home, whether it be due to renting, living with their parents, or because they are saddled with student loan debt. On the surface, it would appear that millennials are not interested in becoming homeowners.
According to an analysis from NerdWallet, the idea that millennials do not want to be homeowners is false, and in fact, the majority of this generation would prefer owning over renting. But they are holding off on homeownership because of real and perceived difficulties in affording it.
According to the report, millennials total 66 million individuals and 24 million independent households and the median age for first-time homebuyers has remained virtually unchanged for the past 40 years.
In addition, two-thirds of millennials haven’t reached that homebuying age of 31, and 22 percent are under 25 years old. Millennials are renting for an average of six years before buying, compared with an average of five years for renters in 1980. Millennials are expected to form 20 million new households by 2025.
“There’s a strong indication that millennials do want to become homeowners, which is quite different from what we’ve heard,” says Chris Ling, Mortgage Manager at NerdWallet. “While overall homeownership has declined, millennials do see the long-term value in owning a home.”
According to NerdWallet, millennials stated that the biggest obstacles to getting a mortgage are:
- Insufficient credit score or history
- Affording the down payment or closing costs
- Insufficient income for monthly payments
- Too much existing debt
NerdWallet found that many millennials are unaware of down-payment options to help them obtain a mortgage loan.
“Many millennials believe they are unable to afford homes, when really many of them are unaware of the different financing options that exist — particularly those that allow for a down payment of 6 percent or less,” Ling says.
Another reason that millennials are staying away from homeownership is student loan debt, the data found.
“With student debt on the rise, there’s been a lot of speculation about whether the cost of a college degree hurts an individual's ability to buy a home,” Ling explained. “From what we’ve seen, getting a four-year degree or higher is actually positively associated with homeownership — even when accounting for debt.”
NerdWallet found that barriers to homeownership may be not be as high as many millennials perceive them to be. "Although factors like low savings or a poor credit score might seem insurmountable, there’s a variety of resources available to help younger Americans buy their first homes," the report said.
“Millennials—and first-time homebuyers in general—should never just assume they can’t afford a home. The first step to owning a home is knowing how you can finance it, so you should always research your options,” Ling noted. “Buying a home may be more of a possibility than you realize.”