Millennials Don’t Shop Department Stores, But They Do Want Home Ownership

Millennials have too much student debt to be home buyers, and they would rather rent in urban centers where they can walk to a restaurant to order specialty coffee and avocado on toast. Those are some of the 8 myths about this population group that get blown up by Dr. Jessica Lautz, vice president of demographics and behavioral insights for the National Association of Realtors.

Not only are Millennials the largest adult generation, but Lautz’s number crunching finds they are the largest generation of home buyers at 37% and the majority are repeat buyers, not first timers. While the preference for urban centers was true before the pandemic, one-fifth of Millennials buy in small towns thanks to the ability to work remote and a cheaper price tag relative to the big cities. 

As for student debt holding back home buying, Lautz writes:

Among successful home buyers, 43% of younger millennials and 37% of older millennials had student loan debt, with median amounts of $25,000 and $33,000, respectively. These buyers were able to enter the housing market, but they did make financial sacrifices, found more affordable locations, and some did have parental help. Regardless of these decisions, having $25-33K of student loan debt erodes the ability to save for a downpayment and closing costs. Even among successful home buyers, the debt that did hold them back most from buying was student loan debt.

Buyers who had student debt purchase homes that were 19% less expensive than those without student debt, even when controlling for family help, size, and location of the home purchased. In a housing market with rapid and consistent price escalation, it is difficult to find a more affordable property to purchase.

When looking at student loan borrowers who do not own a home, 60% of millennials said student loan debt is delaying them from purchasing. Non-owners are being delayed from purchasing because they cannot save for a downpayment or closing costs, do not think they can qualify due to their debt-to-income ratio, don't feel financially secure, and would not be able to make their mortgage payment in addition to their student debt payment.

Read More