Canada's Condominium Magazine
The home ownership rate in the United States has dropped to its lowest since 1965. CNBC reports that just 62.9 per cent of Americans owned their homes in the second quarter of 2016, the lowest rate in two generations. During the housing boom of the mid-2000s, the rate was as high as 69.2 per cent. The reason for the decline, according to real estate experts like Trulia, is millennials, who have the lowest ownership rate of their age group ever.
What’s the problem with millennials? They tend to have a lot of student debt, which gets in the way of saving for a home. And they have delayed life choices like marriage and parenthood, which traditionally drive home ownership. The low inventory of homes available for purchase, and the high prices of the homes that are available, don’t help.
This finding is supported by new research from TD Bank (US), which recently surveyed about one thousand consumers who are not currently homeowners but who are considering purchasing in the next five years. The survey revealed that almost two-thirds of Americans in the millennial age group, roughly 18–34, are in fact considering buying a home. Many, about one-quarter, are actively seeking. However, an even greater number, 74 per cent, said that saving for a down payment was the biggest obstacle and the reason for their delaying a purchase. It is not made easier by the fact that for many Americans, wages have not yet recovered from the hit they took in the recession of eight years ago.
Before taking the plunge into the housing market, millennials have three other priorities, the survey found: saving the down payment, paying off existing debt, and having a steady job. This, says the bank, is “encouraging,” as it shows millennials to be more conservative with their money than their youth would suggest. Not only do they want to have a good down payment and a relatively clean debt slate, they also say they want to pay their mortgages off quickly. However, more millennials are putting less than 20 per cent down on a home than other age groups. The 20 per cent down payment is a “major barrier” for many Americans, especially for this age group.
Other reasons for delaying a purchase include not being able to find a home in the right price range, or that the would-be buyer likes, and not being approved for a mortgage. A fairly high percentage (14 per cent) said that renting is better than owning. Those who said that may not be aware that rents are rising faster than home prices in many US cities, according to the National Association of Realtors.
As far as the kind of homes they are looking for, the number-one requirement is that they be “move-in ready,” with attractive design, a nice backyard or pool, and proximity to schools and daycare. American millennial home buyers decidedly favour the suburbs over the city; 47 per cent would choose a suburban home while 25 per cent would choose the city. Obviously they are not concerned about mobility: proximity to public transit had the second-lowest level of importance for millennial home buyers.