The Reduced Buying Power of Millennials Is Hampering Homeownership
Millennials (born between early 1980s and late 1990s) are putting homeownership on hold. In fact, while many millennials eventually want to buy a home, only about 36 percent of those under age 35 currently own one, and only 47 percent of non-homeowners are considering buying one within the next five years. Millennials are backing out of homeownership for primarily two reasons: They’re getting married later and spending more time and money on college. Both of these factors have significantly reduced the buying power of millennials.
Fewer tying the knot
In a recent Pew Research survey, just a quarter of millennials identified as married — down by over a third compared to Gen Xers and by nearly half for boomers. Unlike their parents and grandparents, many millennials are opting for alternative lifestyles. The traditional life trajectory of “college, job, marriage and homeownership” has given way to a variety of lifestyle choices. Some couples choose simply to live together, sharing an apartment or similar living space as co-renters. Many have moved out of college dorms to live with two or three friends, surviving a poor economy and underpaying jobs by sharing expenses. Other college grads, saddled with college debt and the inability to find a decent job, have been “boomeranging” back home to live with their parents. Well over a third of all millennials now live with their parents — the most in over 40 years. Those who choose to brave it out on their own may remain renters for some time.
More graduating in debt
A college degree should, in theory, provide an individual with the earning power required to buy a home, but today, just the opposite is true for many millennials. While the number of millennials seeking degrees has significantly risen, today’s graduates are saddled with “non-dischargeable” debt loads that can sometimes be as high as $250,000 or more. As a result of this debt, the buying power of many millennials has been drastically reduced — at least until they get a high enough paying job and begin to significantly reduce their educational debt, which often takes a decade or more. The stratospheric rise in college costs has forced some millennials to put off getting a higher education altogether, ultimately reducing their income and their ability to qualify for a home purchase.
Getting millennials to buy
To get millennials back into homebuying, lenders must find creative ways to gauge a millennial’s credit worthiness and dovetail their limited purchasing power with appropriate products. It starts with getting a more complete picture of a millennial’s employment, credit profile and payment history. Tools like Equifax’s Prescreen Direct™ with Property can help lenders target their marketing campaigns toward millennials more effectively, providing insight into which mortgages and home equity products can be offered to the consumers most likely to utilize them.
Want to turn millennials into homebuyers? Get a clearer picture of who they are and what they need.
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