Is it harder for Millennials to buy a house?
Generation gap in home purchasingThe housing market has changed considerably since the baby boomer generation, and so has the process of becoming a homeowner. In comparison to the previous generations, millennials are more in debt, have a less net worth and a lower likelihood of earning more money than their parents. These factors, including the increase in student loans, have stopped the millennials from purchasing a house. The generational gap in home purchasing is affecting many millennials’ ability to achieve the American dream of owning their home.
Millennial financial disadvantagesMillennials are facing a financial struggle not just in terms of purchasing homes but in terms of financial stability. Compared to past generations, millennials are starting their adult lives with a disadvantage in terms of employment, wages, and debt. Millennials are carrying vast amounts of student debt and are therefore starting their adult lives with significant financial burdens. Bullet Points:
- Millennial men with only a high school education are earning $8,000 less annually
- Millennial women with only a high school education are earning $5,000 less annually
- 32% of millennials say that debt is their number one financial concern
- 41% of millennials have delayed buying a home because of their student loan debt
Higher student debt and home buyingThe high cost of education means that millennials are starting their adult lives with vast amounts of debt that limit their spending power and savings capacity. One significant impact of this is that millennials are less likely to buy a home. A recent study by the Federal Reserve found that a $1,000 increase in student loan debt can decrease the home-buying rate of potential buyers by about 1%. As a result, many millennials are delaying or entirely giving up on the dream of homeownership.
Net worth comparison with older generationsNet worth refers to the assets that a person owns, minus their liabilities. In comparison to previous generations, millennials have a significantly lower net worth because of their spending power and buying capacity. With the increasing housing and other living costs, coupled with stagnant wages and fewer job security, millennials are finding it challenging to accumulate assets. Bullet Points:
- The net worth of millennials is 40% smaller than Generation X’s in 2001 at the same age
- The net worth of millennials is 20% smaller than the Baby Boomer’s net worth at the same age in 1989
- 43% of millennials have a negative net worth