Friday, February 06, 2015
Young homebuyers are missing from the U.S. housing market
Where did all the young buyers go?
It’s a question real estate agents across the country are asking.
And they don’t like the answers that indicate that many folks in their 20s and early 30s no longer are on track for homeownership.
Economists and housing analysts say the shift is due to a combination of economics and psychology.
“What is wrong with young people?” asks Lawrence Yun, chief economist of the National Association of Realtors. “Even at these low mortgage rates, young people are not getting into the housing market.”
Yun said student debt is keeping many young Americans in apartments.
“On average they pay about $300 a month for a recent graduate for student debt,” he told real estate agents meeting in New Orleans last weekend. “That’s why many of them are still living with their parents.”
Surveys of young homebuyers show that high credit card debts and medical expenses are also big obstacles to coming up with the money to pay for a house.
“The desire for homeownership by the younger generation is still there,” Yun said. “Living in their parents’ basement — trust me — is not their American dream.”
But economics may keep them just dreaming instead of buying. High apartment rents suck up a growing chunk of young Americans’ income.
The average net worth of a renter in the U.S. is only $5,500, compared with almost $200,000 for homeowners.
“If you are a renter, it’s going to be hard to buy” because of the burden of coming up with down payments and closing costs and meeting mortgage requirements, Yun said. “The renter population is up 4 million from the low point in the economy, and they are not accumulating wealth.
“The homeownership rate is essentially at a 20-year low, and it could fall further,” he said. “The wealth increases are going to fewer and fewer homeowners, and we have a rising renter population.”
The share of first-time homebuyers is now at an almost three-decade low.
Some young workers who can afford a house are also put off by the recent housing market crash, which showed them that homeownership has risks.
“Many people watched their friends or loved ones lose their homes or suffer financial hardship in the housing crisis, and this has deterred them from entering the homeownership market,” said Mel Watt, director of the Federal Housing Finance Agency. “Increasingly, millennials — which include young people between 25 and 34 years of age — are choosing to remain renters.
“Many are getting married and having children later in life than their parents did, which often delays a decision to become a first-time homebuyer,” he said. “Additionally, many of them continue to face economic hardships from having entered the job market during the Great Recession.”
There is also a wide generation gap between real estate agents who market houses and young buyers.
The median age of U.S. Realtors is now 56.
Yun said that to serve younger buyers, his industry needs an influx of younger professionals.
“We have many, many people in the 50s and 60s and not so many in their 30s,” he said. “How do we recruit younger people?
“They are needed for the millennial buyers that will be coming,” Yun said.