For years, many people have assumed that the housing market is just one of the countless number of industries being "killed off" by millennials, along with department stores, diamonds, casual chain restaurants and diamond rings.
The reasoning made sense to many: weighed down by student loan debt and traumatized for life by the 2008 housing crash and subsequent recession, millennials would be renting for the rest of their lives, either by choice or necessity. As a result, the once mighty real estate industry was expected to shrink due to neglect.
But while debt and other unique factors are keeping a lot of young people from buying a house, the truth of the matter is that at this moment in time, millennials are actually driving the housing market, not slowing it down.
Making a bad first impression
It's only natural to wonder whether millennials and home ownership would always have a strained relationship, considering the dire state the housing market was in a decade ago.
The oldest members of the millennial generation were just 28 years old when the 2008 housing crisis occurred, noted Policy Genius. The following year, unemployment peaked at 10 percent, meaning many young college grads had a diploma but not much they could do with it. As the economy slowly recovered, the stereotype of the millennial still living in his or her parents' basement began to emerge. Those lucky few who had moved out, it was also assumed, were far too nomadic and financially insecure to ever commit to a mortgage.
But in the last ten years, the conditions have changed, and so have millennials.
The oldest millennials are now closer to 40 years old, while the generation's youngest members are in their early twenties and have the good fortune of starting their careers during a period of record high employment. To that end, millennials have outpaced boomers and gen Xers to become the largest generation in the workforce, according to Pew Research.
And although the 2008 crash made a strong impression on millennials, many of them were still children or teenagers when it occurred, meaning they ultimately reached adulthood during a time of improved economic conditions. And now many of them are settling down, getting married, having children and buying homes, just as previous generations have done.
Millennials driving market through roadblocks
In 2018, housing price growth finally began to soften significantly. The slowdown was attributed to the belief that prices in many markets were reaching their breaking point, along with the fact that rising mortgage rates were making home financing less affordable.
Despite those negative national trends, millennials continued to buy houses. The U.S. Census Bureau's most recent Housing Vacancies and Homeownership report, released in October 2018, showed that the homeownership rate for Americans under 35 had increased to 36.8 percent, its highest point in five years. The share of millennial homeowners had been 36.5 percent in the previous quarter, and 35.6 percent the year before.
Although the number was below the 40 percent-plus share that has been historically common for Americans under the age of 35, the figure still demonstrates that millennials are becoming homeowners, and doing so at a time when many other buyers are backing away from the market.
As a result of increased millennial participation at a time of reduced overall activity, millennials can truly take credit for driving the housing market. In the third quarter of 2014, the national homeownership rate hit 64.4 percent, its highest point since 2014, thanks in large part to first-time homebuyers who got tired of renting and decided to own.
During the same period, quarter-over-quarter homeownership rate for the 45 to 55 age bracket actually declined.
"Led by another surge in owner household formation, homeownership rates are up again, but those gains are not driven by those who experienced the housing crash and lived to tell about it," said Skylar Olsen, Zillow director of economic research and outreach. "First-time homebuyers drove the market this year."
Market slowdown an advantage for first-time homebuyers
The rising mortgage rates that are largely responsible for the lagging housing market have actually proven to be an aid, rather than a deterrent, to some millennial first-time homebuyers.
Young house-hunters are taking advantage of the lower competition by making aggressive offers that in years past would have likely been outbid by older and wealthier homebuyers.
Millennials are also in a position of greater financial security, enabling them to compete for high priced homes. According to Ralph McLaughlin, chief economist of Veritas Urbis Economics, millennials who struggled during the recovery are now benefiting from an improving labor market, landing jobs that pay better than their previous positions.
"They had to come up with a down payment, they had to overcome bad credit," McLaughlin told USA Today. "They still want to own homes."
McLaughlin was also believes that the recent jump in millennial homeownership is a sign that the current housing slowdown just a temporary setback, and that young homebuyers will power the market going forward.
"Because that group is so big, it can help support the U.S. housing market indefinitely," McLaughlin said of the millennial generation.
Though that may still only be a prediction for now, it's clear that at least for now, millennials are driving the housing market, and it looks as if they are steering it towards a bright future.
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