Homeownership, once the milestone many young adults strived for to prove “they made it”, has seen a steady decline from the younger millennial generation. There have been many reports and articles about millennials and their “unusual” buying behaviors; many claiming that this generation simply is changing the narrative of what it means to attain the American dream. Although that may very well be true, in the case of delayed homeownership, there may be an even simpler reason behind why this generation is opting out: affordability.
Low housing inventory has been an issue and on many industry insiders’ radar for quite some time now, but the supply of starter homes is even more stark which makes home prices rise. This fact is knocking many millennials in competitive markets out of the running. Another contributing factor to the home buying delay is credit history. According to data collected from TransUnion, about 38% of millennials fall into the subprime credit category meaning their credit history/score is below average. Being a high risk borrowers makes housing affordability even more challenging because the borrower usually has to apply for loans with higher interest rates and less favorable terms.
With all that being said, millennials may be delaying homeownership, but that doesn’t mean they aren’t planning on ever purchasing a home. The job market is stable and people’s overall incomes are on the rise. As the younger generation continues to take steps to improve their financial situations and (hopefully) as inventory starts to catchup with demand, we will begin to see more millennials take the next step into homeownership.