Why Millennials are Delaying Home Ownership

Millennials Delaying Homeownership

Editor’s note: I’m part of Generation X and I bought my first home at 32.

We may call it the American dream, but these days, it may seem as though home ownership is more like the American fantasy for young adults.

Members of the so-called Millennial generation—those born between the early 80s and the mid 90s—are facing the possibility of renting long into adulthood, despite low post-bubble mortgage rates and home prices.

According to a recent Federal Reserve report, only 9 percent of 29 to 34-year-olds took on a first-time mortgage between 2009 and 2011, while 17% of that age demographic was buying a first home a decade earlier. Clearly, the bar to home ownership has gotten higher for current young adults than it was for their Generation X brothers and sisters.

Millennials are often mis-characterized as entitled, immature, and unwilling to grow up, and unfortunately, the relatively low percentage of home ownership among this generation does nothing to improve that reputation. But there are a number of factors contributing to the home ownership challenge among this demographic—none of which has to do with the supposed immaturity of an entire generation.

Here are some of the reasons why you’re not seeing 20-somethings buying homes, and why their home ownership numbers may not improve in the near future:

History of American Home Ownership

Before we even look at the Millennials’ relationship with white picket fences, it’s important to look at where the home ownership ideal came from in the last century.

According to Census housing data, less than half of Americans owned their homes in 1900, and home ownership rates steadily declined for the first 20 years of the 20th century. A young adult coming of age in that era would have had no reason to feel embarrassed for not owning a home.

This is partially because prior to the National Housing Act of 1934, mortgages typically had a term of 10 years and required a 50% down payment.

The Great Depression drove down home ownership rates even more, to a low of 44% in 1940. However, America after World War II saw a booming economy and some favorable changes to tax laws, which really helped to stimulate home ownership. The Greatest Generation also saw the rise of the 30-year fixed-rate mortgage after the war, which truly revolutionized home ownership. By 1950, home ownership rates had reached 55%, and continued to climb through the rest of the 20th century, reaching 66% in 2000.

Millennials grew up at the end of this long cycle of positive home ownership trends. As Derek Thompson of The Atlantic put it,

“Many [Millennials] came of age in the longest economic expansion of the 20th century and graduated into the worst recession since the 1930s.”

The rules that were true for their parents and grandparents suddenly became meaningless just as they have reached adulthood. And since it has been 75 years since the last time such a large group was unable to afford home ownership, it can be very easy to blame the generation rather than the high expectations and the poor economic prospects.

Education and Jobs in the New Millennium

The other hard-and-fast rule that was debunked just as the Millennials became adults was the idea that education is the key to prosperity.

With the continually rising costs of education, it’s becoming less clear if the price of college is worth it. But that realization has been slow to dawn on us. College has been such an important part of the life-arc of the American dream for so long, that taking student loans to pay for higher and higher tuition bills seemed like a reasonable option.

This is why outstanding student loan debt hit $1 trillion earlier in 2012. College students were just trying to find a way to pay for the education their parents and grandparents assured them they needed.

And those college graduates carrying huge loans are finding themselves jobless. The unemployment rate for young adults under 30 has hovered around 12%, significantly higher than the 7.8% unemployment for the country as a whole. This rate also does not include the number of young adults who are under-employed and earning less than they believed their degree could command.

Is it any wonder that young adults are putting off home ownership when they are staggering under the weight of student loans and have concerns about their career prospects?

Delaying Marriage

A further effect of the increase in student loan debt and joblessness among Millennials is the delaying of both marriage and children. This delay often serves as more evidence of the idea of Millennial immaturity, when in fact it’s an extremely practical standpoint: How is getting married and having children a good idea when you are both carrying student loans and have shaky job prospects?

Add to that the gradual culture shift regarding the perceived necessity of marriage—Millennials in general are not embarrassed at the prospect of living together or having children out of wedlock—and you’ll find fewer 20-somethings heading down the aisle.

But home ownership is not only more common among married couples, it makes more economic sense. Two incomes (or the potential for two incomes, even if one spouse does not work) are better than one. In fact, Martin Gervais and Jonas D.M. Fisher conclude in their paper Why Has Home Ownership Fallen Among the Young? that

“a decline in the incidence of marriage mechanically lowers home ownership.”

Young adults are putting off the big decisions of adulthood—specifically marriage and children—because of the economy. Home ownership happens to be another victim of that delay.

The Future for Millennials

When it comes down to it, the current generation of young adults is truly doing the best they can with the cards they’ve been dealt. But between the weight of the expectations of previous generations and the suddenness of the economic downturn, it’s going to be a long slog for them to recover both emotionally and financially.

The fact that many of their elders are tsk-tsking about their supposed fear of adulthood hardly helps this generation to pull themselves up by their bootstraps.

But I have no doubt that Millennials will be able to do just that. After the tough economy and the delays that they have had to weather through their twenties, I am certain that this generation of young adults will discover that good things come to those who wait.

And that includes home ownership.

Are you delaying buying a home? Why? What other barriers to home ownership does this generation face?

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About Emily Guy Birken

Emily Guy Birken is an award-winning writer, author, money coach, and retirement expert. Her four books include The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now.


    Speak Your Mind


  1. Money Life and More says

    I actually bought my townhouse when I was a couple years ago when I was 24. It was a townhouse that is much cheaper than I thought you could ever get a house so it was a no brainer.

  2. Christian L says

    Emily,I’m not entertaining the idea of buying a home for a long while if at all. For me, it just seems like a bad fit. I’m not a fan of maintaining a property every weekend. It sounds unappealing. I understand the rewards of it, but I don’t think I appreciate them.Also, I loathe debt. So unless I make the cash to pay for a home upfront — ha — then I simply can’t see myself wanting to pay for a home.
    -Christian L. @ Smart Military Money

  3. AverageJoeMoney says

    Luckily, I’m beyond that step in life. It’s interesting, though. What does this do to property values over the longer term if this trend continues? If there’s less competition for property doesn’t the price fall? Or is there enough money in being a landlord that the renter market expands.

  4. My wife of 1.5 years and I (25 & 27 respectively) are currently saving up a down payment for a house in a relatively expensive area of Colorado.  We would like to get a single-family home, but even with both of us having good jobs, the prices in the area don’t exactly warrant millennials like us with our budget and no debt to afford the cost without sacrificing location, commute, and/or the home being single-family.   Also, we would like to save 20% but are feeling like we are racing against the risk of interest rates rising anytime.
    I would say that we are fortunate and are as millennials, an anomaly to much of the statistics provided in this post, being married, debt free, and working in jobs related to what we studied in college. 
    I feel that part of our problem personally is the ability to move up the corporate ladder quicker because of our ‘baby-boomer’ bosses that are working into their late 60’s and higher.  Less positions open up resulting in a slower income growth.

  5. PrettyFrugalLyn says

    My boyfriend and I are in the process of buying a home together (fingers crossed!).  We aren’t married, but we found that it would cost us MORE to rent in our preferred area than buy a home, plus we plan on tying the knot in the next couple of years and staying put for at least a few years.  I’m 28 and he’s 27, and all of our friends can’t believe we’re taking such a huge step.  
    I think a lot has to do with where you live as well.  We live in Chicago, where almost no one can afford to buy a place at our ages, so home ownership seems out of reach for a lot of Millennials.