I’m a millennial and don’t yet own a home. There, now it’s out there, and I’ve pointed out the elephant in the room. You might be wondering why an apartment-dwelling marketing guy is writing the weekly Your Mortgage column this week though, and it’s a fair question. I’m not here to convince you that you should be managing your finances a certain way or that it’s the perfect time to buy a home. It may very well be, but that’s not the subject of today’s column.
Instead, I’d like to examine the mental, social, and economic blocks that are preventing millennials from becoming first-time homebuyers when they otherwise could. Think of it as a walk through the mind of a current millennial, a sort of generational pulse check as we do a deep dive into why we’re not buying homes at the same rate our parents did.
The millennial generation, defined as the collective of adults born between 1980-1995, have ample reason, in their mind, to be terrified of purchasing a home. It’s fair to say they’ve been practically conditioned towards risk aversion their entire lives (especially financial) with plenty of data available to back it up. It’s a generation buying less cars, getting married later, living with roommates longer, and having children at a slower clip than previous generations comparatively. None of this is without reason, however, as millennials make up the first generation, according to economists, to be less economically well-positioned than their parents. A large amount of the millennial bloc – enough to make a substantial statistical difference – entered the workforce for the first time or were only a few years into their first job when the Great Recession hit. Imagine being handed your college diploma and immediately having to navigate the worst economic recession since the Great Depression. That happened, and it happened to millennials.
Moreover, during the Great Recession and its corresponding housing crisis, millennials watched as their parents lost their jobs and homes, an experience which understandably left scars on their collective psyche. If it wasn’t their own parents losing a home or their job, a simple walk through their neighborhood would’ve illustrated the extent to which the Great Recession and housing bubble bursting hurt entire sections of their city. This period of time bred a base mistrust of American financial institutions, regulatory agencies, mortgage lenders, and credit agencies that the millennial generation has never quite gotten over. The basic question of trust tends to dominate my generation’s decision making, and we’re more apt to read the fine print to see how anything can be used against us than celebrate the purchase we’ve just made.
Studies have shown millennials to make 20 percent less income on average compared to their parents at the same age, and living has become more expensive, so it’s easy to see why it might take more time for them to reach a comfortable point of liquidity. Things like moving, home repairs, bills from health issues, or any other significant expense that might pop up are all suddenly much larger for a generation that simply can’t put as much away financially
Despite personal, auto, or home insurance potentially covering catastrophic events that could otherwise deplete hard-earned savings, many millennials still feel as though they’re not ready enough to make most big financial decisions. It’s something we see often in the mortgage industry, and reassuring first-time-buyers while educating them on buyer protections, financials, and the purchase process is a huge part of our jobs.
Likewise, the question of absolute need can sometimes guide millennial purchasing behavior more so than passionate dreaming. Many delay big purchases like homes unless they’ve crossed the threshold of feeling as if it’s absolutely necessary (needing more space for a baby, for example) or until it’s undeniable they have ample liquidity to take the hit.
Generationally larger statistical amounts of student loan debt, skyrocketing healthcare premiums, stagnant wages, rising housing costs, and net-unemployment or underemployment rates for millennials all create a perfect storm of anxiety when choosing to take on optional debt, regardless of it possibly being the smart long-term financial move. The net impact of debt anxiety equates to millennials getting married later, having fewer children (often later in life), living with roommates longer, and waiting until the national average age of 31or later to get married. They’re highly anxious about taking big steps until they have years – perhaps even a decade’s worth – of proof they’re stable enough to do so, hence the trends we’re observing.
There’s a lot to process there, right? It’s easy to feel as though I’m painting some bleak picture of the millennial generation as barely scraping by and being highly fearful of doing anything, but that’s not what I’m getting at. A delayed life milestone – having children, getting married, buying a first home – is still a milestone, and there’s nothing inherently wrong with the generational difference we’re seeing. A milestone achieved is a life made better for having done so, and the way we understand, market to, and do business with millennials should reflect that understanding.
Our job is, as one of the good and honest mortgage companies out there, to make sure we’re doing our part to help educate, guide, and build trust with first-time homebuyers of the millennial generation. We’re here as your friendly neighbor when you’re ready, so we’ll be waiting for your call.
