The purchasing decisions of millennials are shaping just about every aspect of American life, including the housing market. Millennials have become known as the generation that won’t buy homes, although they’re not without their reasons. However, simply assuming that members of this generation just don’t want homes is overly simplistic. Many factors have influenced their decisions to put off buying homes.
The Sharing Economy
One of the trends that have affected millennial home buying is the sharing economy. In the sharing economy, items that people once owned outright—like cars or homes—now get shared. That’s why companies and services like Airbnb, ZipCar, and community bikes have become so popular. Basically, people pay for access now, not ownership. This phenomenon became popular at about the same time that the gig economy did—during the Great Recession. Many millennials came of age during or were hit hard by the recession. As such, the circumstances of their lives already forced them to think about ownership differently.
Millennials Can’t Afford Down Payments
Several factors have influenced millennials’ ability to afford homes. Many millennials just can’t afford to buy homes where they’re currently living. In order to do so, they must either continue to rent, or they must move in order to buy. The other issue that they face is student debt. Many millennials carry student loans and can’t afford to pay for both the student loans and a home, even a cheap one. This is particularly true of those who are still trapped in gig jobs. Some savvy banks have tried to come up with some solutions to help them overcome this challenge, like 5% down payments. While there are benefits to 5% down, even that goal is out of reach for many of them. For this demographic, it’s a renters market and will be for some time to come.
What This Means
Because millennials represent the largest demographic in the U.S., their buying decisions will have a significant impact on home sales. Those that do pick up and move in order to afford a home will affect the overall prices and availability in those areas. Of those who are buying homes, they aren’t buying sprawling homes. They want lots of open space and, given their money situations and their job responsibilities, they’re not buying fixer-uppers. They don’t have the time nor the cash to undertake such a project.
The buying habits of millennials continue to shape the financial landscape in the U.S. While this seems to be particularly true in the area of home sales, their financial decisions affect nearly every sector. The reasons for their reluctance is understandable. Those who want to encourage millennials to buy homes must address the issues facing millennials if they are to have any luck getting them to buy homes.
Did you scrimp and save enough to buy a house? Don’t forget to invest in homeowners insurance.