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Are Older Millennials Holding Back Homeownership?

house-in-chains-twoEarlier in the week, the Census Bureau announced that the homeownership rate in the U.S. had fallen to its lowest point (62.9 percent) since the Bureau began tracking the data in 1965.

Why is the share of Americans that own a home at its all-time lowest? The answer could possibly lie with the millennial generation, which many analysts and economists have cited as a key to increasing the homeownership rate.

Specifically, the answer may lie with older millennials—those in their late 20s and early 30s.

“Over the past decade, there has been a sharp increase in the share of young adults living with their parents,” said Aaron Terrazas, senior economist with Zillow. “But lately, the increase isn’t necessarily because the youngest adults aren’t leaving the nest—instead, it’s being driven their older brothers and sisters in their late 20s and early 30s.”

In 2005, about three years before the crisis, Census data shows that 28.2 percent of young adults ages 18 to 34 lived with a parent, a step or foster parent, or grandparent; by 2012, just seven years later, that percentage had increased to 33.5 percent. This represented an increase of about 19 percent—more than three times the increase in the share of young adults living with their parents during the recession of the early 1980s.

7-29 Zillow graphThe share of millennials overall who live with parents has leveled out for the most part since 2012. The share of younger millennials (late teens and early 20s) who live with their parents has always been much higher than that of older millennials who live with their parents—in 2005, it was 47.8 percent for ages 18 to 25 compared to 10.3 percent for ages 26 to 34. During the seven-year period from 2005 to 2012, those percentages had increased to 55.5 percent and 12.9 percent, respectively. Since 2012, the share of younger millennials living with parents has declined while it has increased for older millennials.

“Younger adults may be finding stronger job prospects in a largely recovered labor market even as their older peers continue to struggle, perhaps scarred by tough employment prospects in their early working years,” Terrazas said. “Younger adults might also be willing to live with roommates or in less-expensive (often lower-quality) housing than their older peers. Regardless of the precise reason, the apparent stability over the past three to four years of the share of young adults overall who live with their parents masks starkly diverging trends across more specific age groups.”

The decline in overall homeownership rate has been sparked by a similar decline in the homeownership rate for millennials, which fell by 70 basis points over-the-year in Q2 down to 34.1 percent. Heavy student debt and rising rents are keeping millennials from saving for a down payment on a home, according to the Collingwood Group.

“The challenge still is that builders aren’t constructing entry-level homes,” because they can’t make a profit, says The Collingwood Group Chairman Tim Rood.“They are building 80 percent less $200k and below units today than they were before the recession and that makes it tough for millennials and first timers to buy in.”

According to Collingwood, all of the nearly one million households added in America were renters; and in spite of the "recovery" rhetoric that is tossed around with regard to the housing market these days, eight years after the crisis, the homeownership rate is down by more than 7 full percentage points from its peak of 69.2 percent at the end of 2004.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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