A common narrative in our age is that millennials are breaking with the habits of their parents and grandparents when it comes to homebuying. Millennials, the story goes, are renting longer, living with their parents, and are saddled with student loan debt. In short, it would seem they aren’t interested in homeownership.
But according to a NerdWallet analysis that examined a number of surveys and data from government agencies and private organizations found many of these perceptions to be false. Their research showed that a majority of millennials would prefer owning to renting, but they appear to be postponing homeownership because of real and perceived difficulties in affording it. In fact, their analysis found that millennials, those born from 1981 to 1997, look upon owning a home just as favorably as previous generations.
FACTS ON MILLENNIALS AND HOMEBUYING
- U.S. millennials total 66 million individuals and 24 million independent households.
- The median age for first-time homebuyers has remained virtually unchanged for the past 40 years: In 2015 it was 31 years old, compared with 30.6 in 1970-74.
- Two-thirds of millennials haven’t reached that homebuying age of 31, and 22% are under 25 years old.
- Millennials are renting for a median of six years before buying, compared with a median of five years for renters in 1980.
- Millennials are expected to form 20 million new households by 2025.
- The median income for a millennial older than 25 is $38,220.
A 2014 survey by housing finance giant Fannie Mae found that the majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home. Many young renters in the survey appear to be on the brink of homebuying, and 49% said their next move would likely be to own a home.
And while millennials are more pessimistic compared with other age groups about their ability to buy a home, the majority in the Fannie
Mae survey had a positive outlook about purchasing a house. At least two-thirds of young renters said that it was a good time to buy, even after the housing market collapse in the recession.
“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.”
One reason millennials aren’t buying homes at the pace of previous generations is a perception that they can’t afford to own.